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There are a few problems with that. Exchanges make it difficult to know the current price. They sell fast data feeds to HFT shops allowing them to know about p
by dkfsls 11y ago
There are a few problems with that.
Exchanges make it difficult to know the current price. They sell fast data feeds to HFT shops allowing them to know about price changes before the rest of the market participants.
Exchanges have tons of order types, not just limit and market orders. There are order types that specifically benefit HFT shops by allowing them to pick off limit and market orders.
If you put in a limit BUY order for $10 and the current price is $9.90. There is a big difference between executing at $10 vs $9.90 on large orders. If a HFT shop is able to push the price up to $10 (there are a few ways to do this), you just lost a lot of money and probably made the HFT a nice paycheck when the price reverts back to $9.90.
- kasey_junk 11y agoThere are also order types the specifically advantage large block traders at the expense of HFT market makers. IEX only offers those interestingly, while speaking out about the others. There is also a big difference between pricing something at 9.90 when you think there is very little demand for it, and being prevented from changing the price when the demand changes.