Only a couple of the HFT houses took a pause through the flash crash on the 6th and those that did were the newbies that didn't know how to handle the volitility. Most stayed in and did well. What do you think helped in the recovery from 2:45 pm EDT & 3:45 pm EDT. Buy levels triggered sending the hedges and the HFT's back in to buy. Do some research, use search engines for more that porn, pick up your phone and learn something.
this is not all they do, they also may match quotes in the market and provide additional liquidity, but they also provide ongoing quotes - replacing market makers at less costs, and when they are hitting bids and taking offers, it's because they are keeping stocks from getting too far out of line from plunges in dow stocks or what have you. on May 6, who exactly got hurt? the dumb bots that were selling just because prices were going down, and other over leveraged speculators without risk managment in place that received margin calls and were forced to sell. who benefited? long term value investors, companies with stock buy back programs, and high frequency traders recognizing the panic were given a brief chance to buy stocks at massive discounts. isn't that the way it's supposed to be and exactly what you want as a long term investor? sure it was scary, but bad things happen in the world.
I'm glad a few people here get it. Most of the folks on this site seem to be either slightly simple or hopelessly naive. To be absolutely clear, we (and I can only speak for my firm) don't intentionally front run. We use ISO orders which, due to systemic problems with the way in which Reg NMS is implemented, can sometimes violate time priority. However, I imagine if the ISO issue didn't exist then people would find something else to complain about... "Ban colocation!" Fine, we'll move our machines to the next nearest location with the lowest latency. In fact we'll adjust however we need to in order to stay competitive. I mean, where does this endless blame game end? My Dad can't use a computer to save his life. I don't hear him moaning when he picks up the phone to his broker about all you cheaters using computer software to electronically submit your orders faster than him. Get a grip people! We work hard and are good at what we do. This constant beating of all HFT firms is on whole completely without foundation.
Your firm and others better keep the pr machine going because I sense the tide is turning on hft in general. I am not quite as pissed about hft as many of the traders on this board( I have been in this game for 12 years now and have adapted to all market conditions) but I do hate how hft firms promote themselves as liquidity providers. Anybody with knowledge of the markets knows hft firms are liquidity takers/removers.
HFT is not providing liquidity. Its the side affect of the front running, and the way they trade. And they can pull out anytime they want. Long time ago without HFT, is the market dead? No. For those who trading for a long time, with or without HFT, it doesnt matter to them. So now goes back to what HFT is actually doing, using computer to front run. They will defend of course, since they are making consistence profit. Who is this guy's firm btw?
Nice informative post. Thanks for hanging out in a traders forum. Hopefully some of the information provided will actually sink in where needed.
"In fact we'll adjust however we need to in order to stay competitive." I am not so sure in this environment that may be possible. Shaprio of the SEC has mentioned a transaction tax of .0005cents/ share or $5000 per one million shares in order to slow down HFTs. how would u adjust under those circumstances?
Pardon me? It is common knowledge, (at an exchange level) that HFTs and hedges account for over 50% of market liquidity. If they didn't use the technology of high frequency trading they would still be in the market only in another form. Yes, the market existed prior to the HFTs just like it existed prior to computers. Evolution happens. Keep up and adapt or fall behind. You don't need to be a HFT to be consistently profitable so why chastise those that are?
This is THE major concern and would cause serious ripples. The bigger HFT players are lobbying hard against it. We've done some sums and can absorb the proposed tax but it's going to hurt. I imagine the rebate boys would really feel it though, but they have friends in the right places so I can't see it happening myself. Anyhow, the game is about to begin. Good talking to some of you. The rest of you...wake the fuck up.