> Many HFT jump out when things get volatile, when liquidity is actually required.
Do you have a citation on that? If you look the preliminary Q1 results of Virtu Financial [0] (only publicly traded HFT) they seem to be doing more trading than ever in these volatile markets.
> Ultimately HFT is doing nothing of societal value, the race down to zero is never-ending and we are wasting huge amounts of resources on a totally pointless march towards zero.
HFT is a mature industry. Latencies have mostly stabilized, and profitability is way down in the last few years. Many firms are merging/consolidating. So in the past few years society is actually spending fewer resources - both financially and from a human capital standpoint on HFT than it did in the past.
> Exchanges should introduce random delays to allow market participants who really want to hedge / buy / sell, then we can shift some of the resources to the real world.
IEX is doing something relatively similar to that for a few years now. They have ~3% of US equities market share. People have the option of trading there but they mostly choose not to.
> The system is hugely inefficient. The costs as latencies get lower are ever higher, for an extremely similar end result. The law of diminishing returns.
Due to consolidation, costs are actually decreasing. Could it be that the market is... working?
[0] - https://ir.virtu.com/press-releases/press-release-details/20...
Similar story from Flow Traders:
https://www.flowtraders.com/sites/flow-traders/files/quarter...
So what seemed like a quick drive by wasn't actually correct.
You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction?
> HFT is hugely expensive to maintain. Staffing and equipment costs are massive.
HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment, and a few dozen to few hundred highly paid engineers. Before HFT there were literally _thousands_ of human traders working at different banks doing the same work by hand. Sure in an absolute sense HFT is expensive, but relative to the alternative it is cheap.
> HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out.
If HFT is so bad, then the non-HFT market participants should choose to trade at the delay exchanges that make it harder for HFTs. But they choose not to, generally, because the liquidity - and thus trading costs are higher than trading at the non-delay exchanges.
> Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own.
First you say that HFT is bad because costs are high, but now you say that falling costs are bad because it will lead to monopoly - do you see the contradiction? For what its worth, Although there are fewer firms there is still a lot of competition among the remaining firms.
We should distinguish between volatility at different timescales. An HFT might well be very active over a volatile month, but may still turn off over a very volatile second. I've always assumed that the "HFTs jump out during volatility" complaint was about the latter; it means that when some shocking news hits the market, the HFT firms providing most of the liquidity pull it, and so the manually-entered market orders wanging around end up moving the market further, exacerbating the volatility. Maybe that's not what people are actually complaining about, though.
> HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment
And FPGAs. FPGA development is really not cheap.
Latency-arb is a small part of HFT, if you consider strategies that provide liquidity to be "good HFT" and strategies that take liquidity (via latency arb or other arbs) to be "bad HFT" then those strategies are largely executed by the same market participants.
> Many HFT jump out when things get volatile, when liquidity is actually required.
This feels almost like a "no true Scotsman" situation. Why is liquidity not "actually required" when volatility is low? Is it a moral obligation for any trader to catch a falling knife? I see this condition of "when liquidity is actually required", but I never understood why there was such a strong feeling for it. Why do you believe this?
> Ultimately HFT is doing nothing of societal value, the race down to zero is never-ending and we are wasting huge amounts of resources on a totally pointless march towards zero.
I don't know, I could probably take a similar view of so many jobs in tech. What does society really get from Snapchat, what do they get from HQ Trivia, what do they get from people making powerpoint presentations with arrows that point to synergies. What's the point of any job with some amount of abstraction?
> Exchanges should introduce random delays to allow market participants who really want to hedge / buy / sell, then we can shift some of the resources to the real world.
Why?
> The system is hugely inefficient
Do you know how efficient the system was before HFT started up? And, do you know how many people were working in trading before, and how many are, for a similar fraction of stock volume?
> The law of diminishing returns.
OK.
Again this weirdly mixes HFT with electronic automated trading, which I really don't think anyone in the domain would readily mix.
HFT by arbing over latency is entirely different to the automation of boring trader tasks that see less people employed to do the same thing in the front office.
I can't continue this more, it's just blind allegiance from people who are clearly not in the domain.
HFT != electronic trading
Many HFT jump out when things get volatile, when liquidity is actually required.
Ultimately HFT is doing nothing of societal value, the race down to zero is never-ending and we are wasting huge amounts of resources on a totally pointless march towards zero. Exchanges should introduce random delays to allow market participants who really want to hedge / buy / sell, then we can shift some of the resources to the real world. The costs required to compete at the lowest latencies are large, and forcing small/medium players out the game, as the investment cost is large, which is also bad.
The system is hugely inefficient. The costs as latencies get lower are ever higher, for an extremely similar end result. The law of diminishing returns.