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If black box trading is more than 70% of the daily volume, that scares me. However, to me the downside listed here isn't actually that bad. Let's say you are getting juiced by computer programs and paying too much to get in and getting less to get out of a given position, well if the HFT has created tighter spreads, then a portion of what you are giving up to those programs would have been given up anyway without HFT because the spreads would be wider. But not have any trusted quant analysis on this leaves me just wondering how much the spreads have come in.
Example: if a certain BxA was 1.00x1.05 with HFT, but it would be .95x1.10 without it, then I should be indifferent to HFT even if they are taking .05 from me on each transaction because my net would be the same under both scenarios. Those were purely hypothetical numbers but my point is that some of the profit you're giving up was actually created by HFT to begin with. The sad reality is the smart guys are always going to be on the opposite side of the regulators. So by the time regulators figure out how to prohibit something, the smart guys are already moving on to their next trick.
If black box trading is more than 70% of the daily volume, that scares me. However, to me the downside listed here isn't actually that bad. Let's say you are getting juiced by computer programs and paying too much to get in and getting less to get out of a given position, well if the HFT has created tighter spreads, then a portion of what you are giving up to those programs would have been given up anyway without HFT because the spreads would be wider. But not have any trusted quant analysis on this leaves me just wondering how much the spreads have come in.
ReplyDeleteExample: if a certain BxA was 1.00x1.05 with HFT, but it would be .95x1.10 without it, then I should be indifferent to HFT even if they are taking .05 from me on each transaction because my net would be the same under both scenarios. Those were purely hypothetical numbers but my point is that some of the profit you're giving up was actually created by HFT to begin with. The sad reality is the smart guys are always going to be on the opposite side of the regulators. So by the time regulators figure out how to prohibit something, the smart guys are already moving on to their next trick.