The markets have a much lower IQ with these robots in them, they used to be fast and efficient. Now you have to wait for ages for them to pick up on events. Just look at the red headline brigade of algos using bloomberg. You see the headline unhighlighted 10 mins earlier then some grad at bloomberg decides to print it in red and rerelease and the machines go nuts. It's the most inefficient i've ever seen it. You really have to use kid gloves with these machines because they can't think and have no common sense that's where the danger lies. People profess that the machines dismiss emotion yet the markets are the most panicky and irrational with HFT as they fight to bail first where a human would say hang on a minute this is getting out of hand. The connectivity between the markets has increased too as they all try and scalp the relationships which leads to much greater odds of all out collapse when one machine has an error.
Adding a penny surcharge for each order cancellation would do the trick. And ban flash trading. That simple, really?
when im scalping futs, im constantly pulling orders etc, my problem is with edges due to trading in a way that humans cant, ie too quick for the human mouse/mind, flashing, other types of 'cheat' orders... spoofing etc is fine by me
That's all well and good, but a 1 penny per cancellation, who cares? A heavy discretionary trader might rack up 3 dollars a day in cancelled orders.
That would mean going back to humans on the floor, no electronic trading at all, not even a telegraph and ticker. You're either physically present under the buttonwood tree, or you don't participate. Somehow I suspect that's not really what you had in mind...
HFT firms wouldn't pay millions of dollars a year to co-locate if it didn't give them a huge advantage. That point is irrefutable. Hence the playing field is NOT even for all participants. Quote stuffing, sub pennying, predatory algo's, flash orders, etc etc. They are all profitable for HFT because they know they can't lose if they get filled. Please explain how an HFT firm like Hudson River trading doesn't have a down day. EVER. (and this is not an exaggeration, they NEVER had a down day while they cleared through my old firm)
You must be making a killing with all that market inefficiency, coupled with the fact that spreads, commissions, and exchange fees are at all-time lows. Please let the rest of us know how you're doing it.