back in a day ,before NMS 5 min intraday chart for a stock with avg vol of 100K shares a day look like chart #1 now it looks like chart #2 after they done with what they are proposing chart for same stock with 100K shares avg volume will look like chart #3 good luck trading it
HFT flashing a trillion bids/offers all day long and canceling 99.9% of them isn't market making. Market making was what GSCO, MSCO, MLCO, NITE, etc etc etc did back before the market became an HFT shit show. A real market. With real liquidity.
Thank you for proving my point. You had to go back almost 30 years to find a breakdown of the market maker system. Meanwhile there are literally dozens of individual stock flash crashes, halts, and busted trades in this shit show HFT market every week (and an entire market breakdown less than 4 years ago). The system is broken. Any unbiased participant or observer can see that.
The point is that markets today are no different than 30 or 130 years ago in terms of underlying principle on which they operate and HFT has nothing to do with it. What is different is number of zeros in the number of total market cap stemming from human ingenuity in printing paper (now done electronically) and also in number of market participants. Market regulators who work for financial firms did not wake up one day and decided to give wide and open market access to almost everybody just because they felt like this is good thing; they did it because limited number of specialists and MM could not handle exploding issuance of stocks, bonds and derivatives and had to share the burden of providing illusion of liquidity on much wider basis but still retaining substantial advantages over others. What I objected in this thread is mixing in HFT and FTT as subject that is totally unrelated to the intention to provide wider spreads on small cap stocks to give market players financial incentive to deal/provide more liquidity for small caps. I understand the problem and consider it as a valid option. It is also acceptable because impact on the rest of the markets should be minimal. It does not violate principles of free market access and free unrestricted capital flow but rather is of technical nature.
Let me disagree on one thing - at least - you don't understand the problem. There is supposively a liquidity problem with small caps. Lack of liquidity means large spreads - this is basic market physics. So we have large spreads, and there is nothing here that prevents anyone to add liquidity. So where is the problem? The problem is that many are in effect providing liquidity a-la HFT, and this competition translates into tight spreads & no margin for these players. So the players lobby the politicians, and get support to their bottom-line, said support to be paid by the investors in the form of larger mandatory spreads. This is very much like making a mandatory minimum price of $40,000 for cars, because cars are a much needed commodity & automakers need to make (a lot of) money.
Lobbyist included small cap companies themselves as well which is important factor to consider. It is more like protecting dealer premium (sales margin on car sale price) not regulating the full price. I agree that it is not quite right but impact on markets is minimal. This measure is aimed at attracting longer term interest from market making firms to provide deeper liquidity at the expense -yes you have guessed it - of retail investor. Your reasoning is on naive and simplistic side. I personally only care about one thing - it has no impact on the rest of the markets where the action is. And please, HFT and small caps have nothing to do with each other.