Re:Insights into High Frequency Trading from the Virtu IPO [...
by anigbrowl on Thursday May 04, 2017 @07:46PM
(#14269918)
I get this. I just have an intuition that some friction in a dynamic system is actually a good thing, and also wonder if the growth of HFT might not lead to an unsustainable deviation from an underlying power law distribution of trading activity.
Re:Insights into High Frequency Trading from the Virtu IPO [...
by bovine3dom on Friday May 05, 2017 @03:51AM
(#14271798)
You have reminded me of an excellent article on frictional costs in economics from The Economist [1]. There is a slight snag in that it is an April Fools joke.
[1] http://www.economist.com/news/leaders/21719799-it-time-recog...
You can mentally substitute "cost of trading" for "liquidity".
It's true that you can get costs down to a point where they don't matter. But I think you'll have an easier and more intellectually honest time engaging with the issue if you avoid the jargon and focus on the impact of the jargon. Cost is why we care about liquidity. As markets get less liquid, spreads increase, and the market takes inflicts more and more of a penalty on us for trading at all.