Maybe , maybe not, but they would not necessarily take ALL THE LIQUIDITY EVERY TIME. Frankly, the apologists are sickening.
apologists? no. realists. the fact of the matter is, in this thread there is a big misunderstanding of the scope of how entrenched algorithmic trading is in modern markets. what's being incorrectly labeled as "hft manipulation", is actually a fundamental change in market microstructure that has slowly been taking place over the last 5-10 years. the result of this change is that 90% of all equity trading (and most likely futures and options as well) is in one form or another algorithmic. i wouldn't be surprised if it was higher. what does that mean though exactly? it means that nearly every participant involved in equity trading is using algorithms to execute. the list isn't only specific to hft's... it also includes all the buyside firms like mutual funds, long term hedge funds, macro guys, you name it. they're all using sell-side or proprietary algos to minimize market impact. what do you think a stop is? a stop is just an extremely crude algorithm while modern algos are a lot more sophisticated. what do these advanced algos do? they analyze the order book for liquidity and sentiment, they work orders by adding liquidity passively cancel/replacing as sentiment changes (this can and does happen in subseconds), they take liquidity as urgency increases, they do all combination of these things, and they do it all day long. hft's take the other side of those sell side algos with their own algos. the result is a huge melange of seemingly non-sensical and extremely high paced quote updates and trades. it doesn't stop there though. you don't need to have access to fancy algos to play this game. the exchanges actually provide the tools for anyone to be a subsecond cxl/replacer with order types like the peg. what does a pegged order do? it continuously updates your limit order to mirror the nbbo and whatever offset you decide to give it. so, if you want to have an insta-penny bot from home, just send a pegged order with +.01 offset to the bid on some illiquid stock, and watch the exchange algo get into a penny war with someone else. since it's exchange based, not even the colos can compete in speed. none of the above is going away, because all of those things, whether you like them or not, make markets more efficient. so, in reality, you're not fighting hft's, because they're just a cog in that wheel above... what you're really fighting is progress... and outside of civilization destroying disasters or war, progress doesn't lose.
I think the greatest danger for HFT is the "bid stuffing"... Placing bids with no INTENT to purchase stock could be considered manipulation..... Same as putting a "shill" in the crowd at an art auction....not legal.... IMHO.... SteveD
a computer dynamically responding to the order-book is not front-running. if u have itchy finger and executing trades just cuz u think its gonna pop 5, 10 dollars then thats buy/sell and hope and im glad the boxes ate u alive
why not try to play the bluff before the orders are cancelled? once filled the risk has to be managed on the trade. unlike some of you, the box knows when to cut the loss short (ie. when it made a mistake) but some of you egos are so far up your ass that you dont want to accept the fact that you made a mistake when its so much easier to blame the high frequency traders who can take risk better than you. seriously, some of you need to stop crying and pretending to know what your talking about and get ur education somewhere other than cnbc and fox. this business is not for everyone. even people with masters degrees get burned out and end up working at dunkin donuts.
lol...HFT's are going nowhere! Second, they may have a little bit of regs put on them...but hell GS, and all the HEDGEFUNDS have the quants and darkpools. So, the lone daytrader who left his 9to5, you are gona have to learn to swim with the sharks or become a shark yourselves. Stop List'n to idiots that babel like Cramer (try and track his success rate for a change) and talking heads like CNBC Think how you can ride the coat tails of the HFTs. Take your egos down a notch...understand you lack capital and you lack a quant team. You can't compete at your current level with the HFTs. So, learn how to pick up the nickles or call the bluffs. Stop crying and make money!