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Why would a HFT maintain a huge inventory of stocks? If you make money on the ability to execute trades faster than others on the movement of stocks, you're los
by digikata 11y ago
Why would a HFT maintain a huge inventory of stocks? If you make money on the ability to execute trades faster than others on the movement of stocks, you're losing money by holding them. It feels akin to a car maker holding an overlarge inventory of parts - it's just tied up capital that's not making you money. In HFT, don't you maximize the profit by holding as few stocks for a little is possible?
- kasey_junk 11y agoThe short answer is that they have to. Resting orders from yesterday are always faster than microsecond orders from right now. So a market maker that was super fast but didn't rest orders, would be competing with one that is as fast as them and willing to rest orders. So, the resting order ones win and drive out the non-resting order ones.