Yep and what's worse is many hft firms aren't in the market-making business at all but actually REMOVE liquidity.

What's the mechanism for removing liquidity?

Adding liquidity means to place an order that sits on the book while removing liquidity means to execute against an order that's already resting on the book.

> What's the mechanism for removing liquidity?

Liquidity removal = market order

Liquidity providing = limit order (not immediately executable)

The order type is a red herring (you can take liquidity with a limit order).

The only difference between an order that removes liquidity and an order that adds liquidity is whether it executes upon arrival (removing liquidity) or rests on the order book on arrival (adding liquidity).

This comment is how to tell me you completely misunderstood CLOB market structure without telling me.

If one outlawed / disincentivized hostile the bot behavior you described, there would still be the opportunity to do the good and profitable things I described.

These commenters have no clue what they are talking about. You don’t need to worry about hostile behaviors in the way they claim. These HN individuals are not domain educated and are spouting highly uninformed nonsense. Silly ideas like market orders take liquidity and limit orders provide it show an extremely rudimentary familiarity with only basic terminology of the field and with no understanding of the extremely dynamic and complex nature of modern capital markets. For instance they don’t realize that most longer term managers execute as much as 80% of their orders as passive limit orders, yet they are the ones that are actually liquidity demanders not suppliers.

> These HN individuals are not domain educated and are spouting highly uninformed nonsense.

Yeah, this is highly frustrating particularly for people like me who don't know anything about the domain i.e. HFT/Trading and would like to know more.

Can you recommend some good introductory books/resources ?

I might be biased for some almost personal reasons, however I think there is one book that anyone serious about the field should just read, period.

“Trades, Quotes and Prices”

Authors:

Jean-Philippe Bouchaud, Capital Fund Management, Paris, Julius Bonart, University College London, Jonathan Donier, Capital Fund Management, Martin Gould, CFM - Imperial Institute of Quantitative Finance.

I’m a practitioner and this book is foundational.

Thank You.

Just FYI for others; the full name of the book is "Trades, Quotes and Prices : Financial Markets Under the Microscope".

Looks like a very comprehensive book though somewhat advanced for me at my current level. Do you have a more beginner level book/resource recommendation to go with this where from i can get an overview and familiarize myself with the jargon?

Exchanges put limits on cancellation rates as measured by a multiple of filled orders.

You have to allow strategies that can induce other strategies as by definition those also increase liquidity. It’s a difficult problem to explain to anyone except the very few people who can understand the extremely complicated feedback loops that result from bots fighting bots, however the regulators actually have access to counterparty tagged exchange event data and what is found when this is analyzed is that the net cost for liquidity that is extracted by market makers and short term traders from longer term participants is continuously decreasing not increasing. The system is becoming more and more efficient and not less. This is good for markets and the economy. There are also less people working in financial markets per capita than ever before, granted those who are might include a higher percentage of highly skilled and specialized and educated individuals than previously, which some might argue might be better used in some other industry, but that is rightfully not what the market wants.

There is absolutely no logical reason to “kill off this entire field” those sentiments are purely envy based reactions from those who don’t understand what is happening.

The other fundamental thing is that if you can’t sell something, you don’t really own it.

So wether pairs of people want to buy-and-hold or HFT their assets is really neither here nor there for uninvolved third parties.

The exchanges already charge fees per order https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_...