Theres phantom volume, and then there is phantom volume. When you are not taking risk, have order flow, and are NOT required to make a market, you are simply a blood sucking parasite.
I was absolutely dismayed to hear Senator Kaufman say that the HFTs add liquidity. The cunt obviously doesn't have a clue. & if he is supposed to be fighting for our side, then it's time to bring the white flags out. I would love to be proved wrong, but I can't see for the life of me why there is any reason to be optimistic. American markets will continue to be dominated by these second rate IT geeks for the foreseeable future. They have fucked up on an epic scale and haven't been sent packing so why on earth should that change just because of some poxy show on CBS?
Dismayed to hear it, because it calls into question some belief that politicians always lie? Almost all the liquidity in equities is now provided by HFT-like firms, or sell siders using algorithms to themselves behave like HFT's. There are significant and growing problems with market microstructure (such as internalization AKA sub-pennying AKA price improvement, payment-for-order-flow, and fragmentation), but I don't see much of a connection between these and high frequency per se. In fact, a lot of the quant-oriented high frequency shops seem to have taken a huge haircut on their profitability in recent months (Optiver, All Options, Timber Hill). Perhaps the biggest threat in creating "phantom volume" is from brokers who themselves operate as HFT's, and then trade against their clients, giving the client .0001 per share in exchange for (gradually, trade by trade) closing the public market.
If these HFT's never ever had a losing week why don't we lay the trillions of dollars in social security on the line and create an easy return so no one has to worry about there being no funds left in 30 years. I mean just think about the possibilities We can pay off the deficits Pay off trillions and trillions in debts We can can get the 40 million people off food stamps and out of poverty, I mean everyone can get a little fund and have the computers trade risk free for all 300 million people in the US. We wouldn't have to work or go to school because no matter what the hfts would be making money risk free forever and ever and ever and ever.