4 ms·
My (non-expert) take: HFT is a tool and it can be used for good or bad. Potential good uses may include: reduction of bid/ask spreads, improved liquidity and fa
by stygiansonic 13y ago
My (non-expert) take: HFT is a tool and it can be used for good or bad. Potential good uses may include: reduction of bid/ask spreads, improved liquidity and faster arbitrage of things like ETFs.
However, it can also be used for bad:
http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171484972#.Uz75MfldXm4 http://www.sec.gov/News/PressRelease/Detail/PressRelease/136...
In that link, the SEC charges that a certain firm employed a trading strategy using non-bona fide orders to attract interest on another (bona fide) order. This involved submitting orders on the other side[1] to simulate interest.
HFT makes such strategies viable, or at least more viable.
1. http://www.nanex.net/aqck2/3598.html http://www.nanex.net/aqck2/3598.html
EDIT: Corrected to remove inaccurate information.
- lrm242 13y agoThe action you link to was not perpetuated by HFT. The vast majority of Lightspeed's business is good ole fashioned screen traders, and that is likely what this was. Previous actions for spoofing and layering were also the result of manual traders using regular day trading tools.
- stygiansonic 13y agoMy mistake. I assumed HFT was involved because the timescale of the "layering" orders and subsequent cancellation (following the bona fide order execution) was on the order of several hundred milliseconds.