This is simply bullshit! There is no such thing as fake quote. If they are able to react to market changes faster then you are, that just means that you are slow. Also, if you think that this liquidity is fake and it will get canceled, go ahead and start providing a real liquidity.
"Your mistake is defending the individual investor in the first place....If they want to play in these waters, they accept the risk...That doesn't give them the right to bitch about GS having better programmers or faster computers." - well said Dustin. People always seem to ignore the fact that the market is the professional's workplace and assume pro's should be handicapped to level the field - if you aren't ready to play with the big boys then get out of the way and quit complaining (would you get off your couch, step onto any pro sport pitch and expect to be competative?). Every major market trend, including HFT, provides new profit ops to trade against if you are creative enough to find them. And for anyone that doubts HFT adds liquidiy - watch what happens to the market when a major data provider goes down - think it was in June when the major cdn data provider crashed and the spreads opened up to 10x average with negligable volume for the entire .5 hour they were down. Considering there is very little investor activity in the market right now, the volume you see is mainly algo and prop, possibly a testiment to how much liquidity they do add.
Spoken by someone who no doubt benefits from HFT! You correctly say there is little investor activity but then point out that algos & prop are adding "much" liquidity. Liquidity to whom? It appears they're trading amongst themselves. I see all kinds of BS games being played. These "liquity providers'' have the market rigged. Unfortunately, in order for me to go into lots of detail of what I'm talking about, I'd have to describe my trading technique & I'd rather not do that. But there's a LOT of things wrong with the market right now, including much of the "price discovery" mechanisms many of these HFT jokers so adamantly point to as "beneficial". Yeah, beneficial to them!
Risktaker, I think your concern isn't with trading at a high frequency but rather market manipulation itself. I think everyone can agree that market manipulation is a bad thing. I actually think part of the problem here is that tightening spreads on some on low liquidity stocks might always be market manipulation. On a stock with a small market cap, how can we possibly have that accurate a concept of its value? I don't think anyone can, really, so they develop an artificial concept of value by manipulating the stock price and then trading a tight spread around that. It's a fundamental problem.
as i said before-i see this "bullshit" every single day,when i unload large basket of stocks at the current bids. you can try this too. at any time during regular hours-calculate the spread between bid and ask then-sell 100 different stocks with average volume 50-250K at the bid and see what happens. spread will immediately change,you going to receive few fills ans lots of 1-2 shares partial fills and many of them will either back away from current bids OR someone else will step in and pick those orders and YOU will end up with nothing. i'm talking about simple situation,where 100 shares at $10 is displayed and you buy those 100 shares, not 10000 shares.
Look, if you see 50K shares at the bid, and you send one order at this price it will fill. If not, something is wrong with your infrastructure. If you are doing something else, and you are not doing it right, don't blame hf for this. In any case, you can't argue that spread became order of magnitude smaller after specialist are gone.
I really cant see the point in arguing about liquidity. If you think that the HFTs provide liquidty, most likely you are not an active trader, don't trade at all, or work for a HFT. I dont think the HFTs pay much attention to the local traders, in the futures market at least, because they are such an insignificant part of the volume. They make their money nickel and dimeing the pension funds and their like, making them pay up a cent or two every time they want to buy. This theft from the general public corresponds to perhaps hundreds of millions of dollars a day. In the USA the only religion is technology, and all new technology is good regardless. That is why we will never win the argument against HFTs. The high costs they require mean that only few will survive. When these few control the markets to the extent they currently do in the futures industry, then the manipulation and harm they do will be undeniable. Will anything be done about them then? Short of a revolution, probably not.