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We don't need much more than safe shelter and a shirt on our backs. We could get by with once a day call auctions or even trading stocks face-to-face without an

We don't need much more than safe shelter and a shirt on our backs. We could get by with once a day call auctions or even trading stocks face-to-face without an exchange at all. We don't even need stocks or companies. That doesn't mean intermediation in real-time markets isn't valuable. Say you have a car and want to sell it to buy your future wife an engagement ring. You could take it to CarMax and sell it instantly, or spend your time researching a fair price, posting up ads, cleaning it up for sale, meeting with potential buyers, etc. CarMax has all sorts of "unfair" advantages: they've developed superior pricing models, they have access to historical auction data you may not be able to get, they can sell their inventory in the inter-dealer auction market, they've invested heavily in their own sales force to resell the car, through economies of scale they can hire their own detailers and mechanics to fix the cars up at a lower price, etc. CarMax is clearly superior to you at the "reselling used cars" game, though all the advantages they have are things any competitor could choose to purchase. They make money doing this, but people still choose to deal with them because it's a net benefit to be able to sell your car instantly. Some people prefer to sell their car to CarMax, others try their hand at doing it themselves, and through their patience they may save a bit of money. Likewise you can do the same in the financial markets. You can work your own limit orders to enter or exit positions or trade in the opening/closing call auctions on each exchange, but many traders prefer to trade instantly with quotes placed by a market maker. Being able to liquidate your stock holdings to spend the money on something else instantly is valuable to some people, and they pay for it through the bid-ask spread. You're basically saying people want the wrong things.

ThomPete 13y ago
no i am basically asking whether anyone besides the people doing HFT benefits from it. If they do then it should be easy to point to the positive consequences of HFT in society and a lot more people would back it up. If its only beneficial as a scheme to get money out of the stockmarket then many people are naturally going to be against it. Claiming i am on the wrong side of what people want seem to be a tad ignorant of reality, dont you think
- hft_throwaway 13y ago
  Countless studies point to a lowering in bid-ask spreads (the effective "fee" impatient traders pay to trade) when electronic market-makers entered the market, and an increase in this spread when they leave or are forced out: http://marginalrevolution.com/marginalrevolution/2014/04/a-study-of-limiting-hft.html http://marginalrevolution.com/marginalrevolution/2014/04/a-s... For me to win trades as a market-maker, I have to put up prices that are tighter (buying higher and selling lower) than my competitors. Through this competitive process, the rents earned by market-makers decrease and the end consumer of their liquidity reaps most of the benefit. Since markets have moved away from a monopoly specialist model and become more electronic, spreads (and thus compensation earned by market-makers) have decreased dramatically. Nobody is backing it up because a.) firms involved tend to be secretive so as not to give away any competitive information, b.) there are a lot of slow or inefficient brokers speaking out against it "talking their book", and c.) to the end-user, HFT is like plumbing. I don't thank the city workers every time I hop in the shower, or write a glowing blog post about Visa when I swipe my card to buy goods and services all over the globe. The infrastructure exists and it provides a benefit, but it's faceless and not something most people think about. Most people don't even consider who is on the other side of their trades or where the prices even come from. They just want to click a button and get in or out of a position, and thanks to competing HFTs they can do it instantly, cheaper than ever before.

ThomPete 13y ago

no i am basically asking whether anyone besides the people doing HFT benefits from it. If they do then it should be easy to point to the positive consequences of HFT in society and a lot more people would back it up. If its only beneficial as a scheme to get money out of the stockmarket then many people are naturally going to be against it. Claiming i am on the wrong side of what people want seem to be a tad ignorant of reality, dont you think

hft_throwaway 13y ago
Countless studies point to a lowering in bid-ask spreads (the effective "fee" impatient traders pay to trade) when electronic market-makers entered the market, and an increase in this spread when they leave or are forced out: http://marginalrevolution.com/marginalrevolution/2014/04/a-study-of-limiting-hft.html http://marginalrevolution.com/marginalrevolution/2014/04/a-s... For me to win trades as a market-maker, I have to put up prices that are tighter (buying higher and selling lower) than my competitors. Through this competitive process, the rents earned by market-makers decrease and the end consumer of their liquidity reaps most of the benefit. Since markets have moved away from a monopoly specialist model and become more electronic, spreads (and thus compensation earned by market-makers) have decreased dramatically. Nobody is backing it up because a.) firms involved tend to be secretive so as not to give away any competitive information, b.) there are a lot of slow or inefficient brokers speaking out against it "talking their book", and c.) to the end-user, HFT is like plumbing. I don't thank the city workers every time I hop in the shower, or write a glowing blog post about Visa when I swipe my card to buy goods and services all over the globe. The infrastructure exists and it provides a benefit, but it's faceless and not something most people think about. Most people don't even consider who is on the other side of their trades or where the prices even come from. They just want to click a button and get in or out of a position, and thanks to competing HFTs they can do it instantly, cheaper than ever before.