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I think there is a lot of nuance being left out in these types of defences which are misleading. For example, > Note that the market maker at no point had the

I think there is a lot of nuance being left out in these types of defences which are misleading. For example, > Note that the market maker at no point had the ability to change any order in response to Big Joe. But they sort of can, specifically the canonical example in Lewis' book is that HFT market makers change their standing order on other markets faster than it takes the orders of buy/sellers taking liquidity to hit that venue. That behavior isn't what a reasonable person would expect by default. There is no mention of things like flash orders (which no longer exist in US equities?), hide-not-slide, payment for order flow, maker/taker, etc, all of which are potentially problematic and deserve discussion. In short these defences are nearly as simplistic as the attacks they attempt to counter.

kasey_junk 13y ago
Agreed. But the difference is that the people defending them are not trying through public perception, or regulation to change the current system. If they are not asking for change, why should they be held to a higher standard than the attackers. For all of the potentially problematic items mentioned, there is an equally problematic issue on the liquidity taker side. Invisible order books, iceberg orders, preferred router agreements, and large block rebates are all "features" that the markets provide to give advantages to the large institutional investor that harm the rest of the market but they aren't mentioned in the Lewis book, and are never referenced by folks trying to defend "the little guy".
yummyfajitas 13y ago
Big Joe is a retail trader trying to move 1-2 lots. His order can be entirely filled at a single exchange. Changing standing orders on other markets is only an issue for big players trying to move many lots. You are correct that the financial markets are complex and I can't possible cover every topic. Even if I had the stamina I don't have the knowledge.

kasey_junk 13y ago

Agreed. But the difference is that the people defending them are not trying through public perception, or regulation to change the current system. If they are not asking for change, why should they be held to a higher standard than the attackers. For all of the potentially problematic items mentioned, there is an equally problematic issue on the liquidity taker side. Invisible order books, iceberg orders, preferred router agreements, and large block rebates are all "features" that the markets provide to give advantages to the large institutional investor that harm the rest of the market but they aren't mentioned in the Lewis book, and are never referenced by folks trying to defend "the little guy".

yummyfajitas 13y ago

Big Joe is a retail trader trying to move 1-2 lots. His order can be entirely filled at a single exchange. Changing standing orders on other markets is only an issue for big players trying to move many lots. You are correct that the financial markets are complex and I can't possible cover every topic. Even if I had the stamina I don't have the knowledge.