SEC to meet next week and talk about "ideas" about what to do about high frequency trading, its quite simple, as most have been saying it just place a small transaction tax on the trades, why does there even have to be a meeting about ideas when this one simple plan can curb most if not all high frequency trading. Another article on HFT! In today's stock market, there are two types of trader. Richard Drew, AP One, the traditional investor, places a buy order based on a belief that a company will prosper and that its price will rise, or a sell order based on the opposite belief. continued below: http://www.usatoday.com/news/opinio...09-26/high-frequency-trading-crash/57846524/1
Wrong. There is one type of trader: Trader. When you come to the market to exchange your capital property you are a trader . Nobody is asking why are you trading and how often. Trying to interfere with free markets is naïve: nobody knows what is good or bad for the markets as long as there is free access to markets and market information for all willing participants. The strength of free economy and pace of economic progress is reflected through history of free markets. It moves forward. But there are people who cannot cope with change and want to stop progress. All arguments for tax and new regulation are based on naïve assumptions. Just enforce existing laws.
There isn't free access to all information EQUALLY and AT THE SAME TIME. HFT colocated boxes can cancel/replace 1000 orders before the human eye can even see the quote change. BD HFT algo's are allowed to trade at 1/1000th of a decimal point to step in front of regular traders orders. HFT firms pay millions for priveledged data to analyze what "regular" traders are doing and use that information to take your money. It can all be stopped by 1) Putting a minimum time allocation for cancels (500 milliseconds). 2) Ban co-located servers. 3) Stop allowing the Nasdaq and NYSE to sell data information. 4) Ban sub penny trading. Don't need new taxes or any other changes. This can all be implemented in a week with little work (except the exchanges would lose 90% of their money by not selling out to HFT shops)
1) What is with all the talk about minimum cancel time? So, like, all these firms are posting quotes which they can't cancel for half a second, increasing their risk of getting run over. Spreads will obviously widen, and what happens when market makers get filled on a bunch of orders because they can't move their orders out of the way? Can you say 'crash'? 2) What would banning colocated servers do? It would just cause people to buy servers *really fucking close* to the exchanges. So instead of the way it is right now, where anybody can colocate for a basically reasonable price, 'colocation' will be really expensive and access to information will be even more tiered. 3) Maybe, maybe not. I don't know why you think HFT firms pay millions for data. Maybe in the aggregate. You can get a direct feeds for some thousands a month. Tell me that when you are trading, you are not also analyzing what 'regular' traders are doing. Or are you just upset that they do it better and faster than you? 4) Actually, a better idea is probably to open up subpenny quoting, so instead of only internalized orders getting ridiculous fills, everybody can get them; spreads will tighten and margins will get even thinner and more competitive. HFT provides another service besides liquidity, and that is price discovery. You don't think front running is a good thing? So, the fact that Renaissance (or whoever) is able to use pattern recognition technology to figure out when a large order is about to hit the market and front run it, disseminating that information to other participants -- is worse than them dumping those shares on the market? Market makers translate buy and sell orders into prices. That way, when Average Joe investor buys shares of XYZ in anticipation of XYZ doing well, and in the coming months there are more buyers than sellers, the Joe knows that he made a good decision, because market makers shift their prices to reflect some sort of equilibrium. Well, whatever. Peace out.