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That depends. Their profit comes from somewhere, and it's everyone else's trades. The average investor is giving the HF traders a few pennies on each trade.
by cameldrv 17y ago
That depends. Their profit comes from somewhere, and it's everyone else's trades. The average investor is giving the HF traders a few pennies on each trade.
- wglb 17y agoActually, it comes from the people (brokers) who were making a killing on (by today's standards) enormous spreads between buy and sell. The end buyer is likely ahead.
- pwnstigator 17y agoThe average investor is always paying a (minuscule) spread to trade. If the bid is 57.63 and the ask is 57.64, the "fair value" of the stock is held to be approximately 57.635, so you're losing 0.5 cents every time you trade. If the spread is wider than $0.01, which is the case if the stock's illiquid, then you pay more to trade. The average investor, however, doesn't care about the loss of < 0.01%. Broker fees are much higher than that. Hedge fund traders do actually make markets more efficient, and so those who trade on them get better deals. This is not to justify finance having been enormous talent sink that it has been for the past 30 years; society would probably be better off with these people in science and technology, but the net benefit to the world produced by these people is positive.