High-Speed Trading

[Bevo Incognito]

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[Rex Kramer]

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[Rex Kramer]

And no, it isn't my business. I'm making too much money making irresponsible loans at a bailout bank to evil oil companies. Why would I waste my time/money/efforts doing something when I can just invest my money with non-Instinet people?

 

[JohnnyM]

Any comment on the fake flash orders that are inherently necessary for the high frequency programs?

 

[JohnnyM]

Still no comment Rex? You're being pretty adamant for specifics on another thread, so the least you could do is provide an answer for the question I've asked here a few times now. Thanks in advance.

 

[Bevo Incognito]

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[Rex Kramer]

I wasn't aware your comments were directed at me. My response is that I agree with the following words you typed:

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[Rex Kramer]

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[misirlou]

Explain this paradox.

* We are told that we need different capital gains tax rates for short-term and long-term (i.e. >1 year) trades to incentivize people to invest for the long-term.

* HFT is a great idea because it adds liquidity to the market.

Those two statements are not compatible.

Taken at face value, the first statement indicates we want fewer trades to reduce volatility.

The second statement indicates that we want many trades to improve liquidity.

In reality, I want enough liquidity to keep the markets moving, but at what point is too much liquidity too much? Rather, too little liquidity leads to volatility. I expect that too much does as well.

One point I recall being made after the flash crash was putting a limit on how fast trades can be made. The initial suggestion was to base it on how long it takes to submit an order from the West Coast to the East Coast or some other distance metric. In other words, it would be on the order of milliseconds, which is still pretty fast but not 100s of nanoseconds to microseconds fast.