I normally wouldn't chime in but I need to stick for these guys. Nanex has a really good data delivery system and comprehensive archives. The term "tape" is a relic as much of their archive is derived from physical exchange supplied tapes. Just a carryover in syntax used to represent a daily archive file. Love em or hate em and regardless of their political motives... These guys do data right. If you had over 1000 subscribers paying on average $2500 / month Would you want to deal with the retail traders and all of the associated headaches?
These guys are complete morons. I've heard several interviews with them and they are completely clueless on what HFT really is and who it does or doesn't affect. They have an agenda. Just like everything else in life, follow the money to see what it is. They are having a harder and harder time trying to round up this data and deliver it to clients. So what is their game plan to try and fix the problem? Put an end to HFT so that the extra data stops hurting their business plan. Unfortunately, people are listening to them, even though they seem completely clueless to what is going on. Their agenda is completely clear. However, that seems to be lost in the firestorm they are very good at flaming.
HFT term is damaged by media beyond repair. There is no way anyone can reason with opponents and expect that they will be listened to. Realistic defense strategy is to have Jimmy moment " I have sinned" regardless whether it was a sin and whether HFT will sin again and again. The point is that industry and HFT players should do something dramatic and positive for the marketplace before any stupid idea to regulate or tax emerges from outside. At the minimum they should try to get off the headlines.
I think one of the problems with those that participate in HFT do not speak up enough about it. You can count the number of people that publicly defend the practice in the media on one hand. I think many firms are so scared of speaking up because they don't want the general public to know how much they make or how the money is exactly made (for fear of losing an edge). However, the problem is, if no one defends this particular facet of trading, it could very well be regulated to death by those that are so hung up on destroying it. An edge won't matter at that point.
Everything that I've experienced as a human trader with HFT has been negative, especially on low volume stocks. Spreads are higher and the number of shares available at any price point is lower. For the average investor, I would suspect HFT has made fills worse, not better. I guess my point is, I don't see how you can defend HFT with a straight face.
Low volume stocks are not on the radar screen of HFT. Wrong logic and wrong target. There are reasons why HFT must exists. One pointer would be Knight debacle. If properly analyzed it shows you how much market activity single biggest specialist on NYSE can handle before going bankrupt and taking exchange with it. They are now on life support because the US needs NYSE as an advertisement of financial power. You can also check market volume charts and total market capitalization over past decades. That could help putting HFT in right perspective without voting for or against HFT. There are probably more reasons.
Sorry, HFT affects even high volume stocks negatively. Spreads are better than low volume stocks, but the shares you can access are tiny as compared to years past. And by the way, I thought HFT was making the whole market efficient - why not low volume stocks too? The bots that I see are trading low volume stocks and it is much worse now than it was back when I started trading. What is your definition of HFT?
Part of the issue is that liquidity has been forced out from equity markets to bond markets and by extension to derivative and currency markets. Again HFT in that case could be wrong target as well. I do not have own definition of HFT but there are books /online references on HFT and DMA (direct market access) and algorithms being used. On that basis I would consider HFT as a wrong term being used and it is part of the confusion. This is just normal evolution of trading and market making on decentralized exchanges using modern technology. It does what has been always there - get an edge over other market player and also provide pooled continuous liquidity and market quotation or simulate it when there is lack of it. You have to understand that markets are not entitlement programs and trading is free and voluntary. To trade you have to have counterparty willing to trade. Nobody has obligation to sell or buy from you. It is that simple.
What do you mean by "shares you can access are tiny"? Do you mean you can see the liquidity, but cannot access it? I've heard a couple of people say this, but never give an example. I'm genuinely interested. Can you give a stock symbol as an example and what sort of share size you are trying to trade? Low volume stocks, I can understand. I believe those are manipulated. Not necessarily by HFT players. To me, the definition of HFT is simply a lot of fast trading (too much for a person or team of people to handle manually) for very small profits per trade. Low volume stocks don't really fit that profile.