alt Hacker NewsYou could do this but the cost would be wider bid/ask spreads for all market participants. If you make it harder for market makers to hedge their position, they will collect a larger spread to account for that. A whole lot of liquidity can disappear in a second when news hits.
I’d rather have penny-wide spreads on SPY than restrict trading speed for HFTs. Providing liquidity is beneficial to everyone, even if insane amounts of money are spent by HFTs to gain an edge.
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Would be interested to see real numbers around societal value from marginal added liquidity versus aggregate spend into the zero sum arms race.
I have also seen enough to be quite sure that many hft strategies are quite normie investor predatory.
Again, I’m not zealot. I trade stuff. I love liquidity. I’m happy to pay someone some fraction of a penny to change my mind. Service provided. But the returns from vanilla liquidity provision commoditized long ago to uninteresting margins. That leaves a lot more of the hft alpha pool in the predatory strategies and capital flows where the incentives are.
It's really binary events that they should throttle execution and do batch orders.
The bad part of HFT is paying the smartest young minds this country has to offer to figure out how the parse GDP data as fast as computationally possible so they can send in an order before other players can. That's a dumb game that doesn't provide much benefit (besides speed in sparse critical moments adding a few % to the funds ROI).
They can arbitrage all day, but don't let them buy every Taylor Swift concert ticket the moment it goes on sale because they have a co-located office with a direct fiber line, ASIC filled servers, and API access.