>And what about stop-loss orders that are triggered. ZH has some good graphs of the >volume pings that drop prices precipitously and the obvious market manipulation. I’m with KidDynamite, just eliminate market orders. Problem solved.
justin88 Wrote: ------------------------------------------------------- > I never said that “without HFT we’d go back to the > $100 with spreads at 25c”. I was merely pointing > out that the bygone days you yearn for were far > worse than what we have now, particularly for > retail investors. A lot of the innovation we’ve > had has been beneficial for retail investors, > including IMO, HFT. Yeah, I yearn for the days, perhaps 10 years ago, when everything was massively inefficient. There isn’t a single shred of “innovation” that has been good for retail investors in HFT. > > HFT wouldn’t exist unless there was already a > market inefficiency. HFT in essence is providing > small amounts of liquidity for certain names, on > certain venues, at certain times. Retail > investors, while not getting perfect execution, > are getting better execution, partially due to > HFT, than ten years ago. (Very few even paid > attention to execution at all ten years ago.) What “market inefficiency” are you speaking of? Taking advantage of minute price differences, or blatantly manipulating prices? I guess with such efficient markets we’d never have had the credit bubble or the .bombs. Thank god for HFT. > > Perhaps your lolrage is better directed toward the > fragmentation of the markets than HFT? The reason > SS flash crashes happen is because liquidity is > fragmented across dozens of trading venues, many > of which are trading the exact same/fungible > things, but the price on one of those venues > temporarily plummets/rips because someone routed > an outsized amount of flow to that venue relative > to its liquidity. Yeah, perhaps if we tripled the current volume on the major exchanges we’d have an uber-efficient market. Ohh wait, we already did that and it didn’t do dick to make them more efficient.
spierce Wrote: ------------------------------------------------------- > […] I don’t know why I’m trying to explain things to you, since you seem to have an axe to grind. Hopefully others will benefit from a more rational discussion. There are obviously still imperfections with the markets; in particular I’ve noted the fragmentation of equity liquidity is a problem. The markets will never be perfect; nonetheless the markets are fairer and more liquid than they were ten years ago, particularly for the retail investor. For instance, as a retail investor in my Fidelity account, I can trade the S&P500 index in real-time, commission free via an ETF. Should I choose to invest in it, I pay a ~9bp expense ratio. Should I choose to trade it, the spread is usually $0.01. The top of book is usually liquid enough to support $1,000,000 trades at market. This is effectively infinite liquidity for a retail investor trading this asset. HFT plays a major role, not only in liquidity, but also in the efficient aka fair pricing of all kinds of cross-market assets. This cross-market liquidity allows retail investors to trade markets at very fair prices when they were previously inaccessible. Two examples: GLD and LQD are ETFs that enable the retail investor to take previously-difficult-to-assume risks (gold and diversified IG corporate bonds), due to market structure and minimum price. (Front month gold on the CME is more than $100,000 per contract, and a diversified bond portfolio would require even more capital.) One could argue the rapid pace of financial innovation is contributing to the bubble pricing of gold and bonds, but I digress.
justin88 Wrote: ------------------------------------------------------- > spierce Wrote: > -------------------------------------------------- > ----- > > […] > > I don’t know why I’m trying to explain things to > you, since you seem to have an axe to grind. > Hopefully others will benefit from a more rational > discussion. > > There are obviously still imperfections with the > markets; in particular I’ve noted the > fragmentation of equity liquidity is a problem. > The markets will never be perfect; nonetheless the > markets are fairer and more liquid than they were > ten years ago, particularly for the retail > investor. > > For instance, as a retail investor in my Fidelity > account, I can trade the S&P500 index in > real-time, commission free via an ETF. Should I > choose to invest in it, I pay a ~9bp expense > ratio. Should I choose to trade it, the spread is > usually $0.01. The top of book is usually liquid > enough to support $1,000,000 trades at market. > This is effectively infinite liquidity for a > retail investor trading this asset. > > HFT plays a major role, not only in liquidity, but > also in the efficient aka fair pricing of all > kinds of cross-market assets. This cross-market > liquidity allows retail investors to trade markets > at very fair prices when they were previously > inaccessible. Two examples: GLD and LQD are ETFs > that enable the retail investor to take > previously-difficult-to-assume risks (gold and > diversified IG corporate bonds), due to market > structure and minimum price. (Front month gold on > the CME is more than $100,000 per contract, and a > diversified bond portfolio would require even more > capital.) > > One could argue the rapid pace of financial > innovation is contributing to the bubble pricing > of gold and bonds, but I digress. Obviously somebody believes everything the Lords of Finance has said is good for society. Just as much as you wonder why you bother to edumacate my poor soul, I wonder if you even have one. Keep on believing in your (and their) greatness while the systemic risk inherent in such systems increases. I am sure the SEC investigation will result in bupkis, that’s what happens in a “free market” (aka, purchased regulators) situation anyway.
I’ve pointed out repeatedly that market fragmentation, in the short run, is not a good thing for the retail investor. In the long run, it is beneficial, and we’ve seen dramatic technical advances in this space due to competition. PS No, I don’t have a “soul”. I’m a complex bag of meat and water. Keep your sanctimonious, passive-aggressive bullshit to yourself, please. Thanks! 