Re:Why Do High-Frequency Traders Cancel So Many Orders?
by tptacek on Saturday October 10, 2015 @09:39AM
(#10365469)
I'm not sure I understand the superpower you've just assigned HFTs. If a value trader does a ton of research and decides to adjust their position in a stock, exactly what is it that an HFT can do to capture "a substantial portion of their profits"?
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Re:Why Do High-Frequency Traders Cancel So Many Orders?
by yummyfajitas on Saturday October 10, 2015 @09:55AM
(#10365523)
The HFT can afford to provide a tight spread to Joe 401k, who typically buys at most 1 lot at a time. He can afford to do this because when there is a large surge of demand, he has the ability to rapidly reprice his orders.
I describe the process in a bit more detail here: https://www.chrisstucchio.com/blog/2014/fervent_defense_of_f...
This enables market makers to price discriminate between Joe 401k (who pays less) and David Einhorn (who pays more).