Re:A High Frequency Trader's Apology, Pt 2
by nhaehnle on Thursday April 26, 2012 @05:14PM
(#3896169)
Actually, out of the three links the first one does not talk about HFT at all, but about algorithmic trading. I don't think anybody seriously thinks algorithmic trading is bad per se.
The third link talks about reducing the bid/ask spread. Fair enough. However, what people seem to forget in these discussions is that if you are genuinely trading in the long run, then the bid/ask spread is mostly irrelevant anyway, because it is totally dominated by intraday fluctuations. Whether I buy at the offered price at 12am vs 1pm makes a much bigger difference than whether a HFT reduced the spread by some small amount. I have yet to see an argument that the sum of intraday fluctuations + bid/ask spread is helped at all by HFT.
So one study remains (this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1624329). This one might genuinely apply - I haven't had the time to go through it - but the abstract isn't exactly enthusiastic, and probably disregards the social costs that come from people being sucked into the field. So I am still skeptical. Confirmation bias applies as well, I guess ;)
The third link talks about reducing the bid/ask spread. Fair enough. However, what people seem to forget in these discussions is that if you are genuinely trading in the long run, then the bid/ask spread is mostly irrelevant anyway, because it is totally dominated by intraday fluctuations. Whether I buy at the offered price at 12am vs 1pm makes a much bigger difference than whether a HFT reduced the spread by some small amount. I have yet to see an argument that the sum of intraday fluctuations + bid/ask spread is helped at all by HFT.
So one study remains (this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1624329). This one might genuinely apply - I haven't had the time to go through it - but the abstract isn't exactly enthusiastic, and probably disregards the social costs that come from people being sucked into the field. So I am still skeptical. Confirmation bias applies as well, I guess ;)