HFTs certainly are making money. But they're making money by making the market. And they're making a lot less money than they used to which you can see because spreads have shrunk dramatically. This is because computers can do this job much faster and cheaper than the humans who did it before could.
It's the same kind of automation we've seen in many other industries.
Re:For the Love of Money
by dredmorbius on Monday January 20, 2014 @09:13AM
(#7089552)
But they're making money by making the market.
That's ... an unsubtantiated assertion. Lots of evidence to suggest the situation's otherwise, at least in large part.
There was an excellent ACM paper posted to HN a few weeks back:
One is that the seller loses on additional value. The other is that the HFT has bought from a seller who would have sold to you, but sees a higher buy price and sells to that instead, so you miss your trade.
For low-volume traders these aren't huge issues, but for institutionals or others looking to make or exit a large position the costs can mount. Again: HFT wouldn't be undertaken if there wasn't value to be extracted in doing it, and that value is coming directly from other buyers and sellers, just as when you introduce a middleman to any other transaction.