Not to mention, an abundance of aggressive misuse of terms of art such as "insider trading", "front running", and others. These terms have a well-defined meaning in SEC and FINRA regulations, and it does no one any good to accuse HFT of doing things that it isn't doing.
Second, the "spirit of the regulation" about front running is about allowing people to trust their agents. Other regulations in the same spirit are lawyer-client confidentiality and "financial advisers can't take gifts from companies they give advice on" regulations.
There are no "you can't kick people's ass in the stock market" regulations, in letter or spirit. If you play the stock market everyone is trying to take your money. You are trying to take theirs.
For years, mil-spec GPS time was masked with randomness and unavail to the public. Why not do this with the markets? The regulators only care about mean prices being unbiased. They should equilibriate just fine with some non-sequential information introduced. Why or why not?
If the timing is perfectly tractable the system is gamed. A small amount of noise that prevents manipulation is a good thing over time for the market. It means the stock is going to have less vol which increases the value of the market equity given constant cash flows. That's another policy goal more broadly. That is, if it works this way.
I think you're overestimating the cost of running an exchange by several billion dollars.
>I don't know why it's bad that people who don't need low latency are allowed to not pay for it.
FRONT RUNNING
>"Quote Stuffing" is not the nefarious activity that Nanex portrays it as. It's generally the result of your algorithm screwing up
No, it's generally the result of an HFT intentionally trying to clog up the order stream (in order to push everybody else back), or trying to gain an information advantage.
>It provides no benefit to the trader
Now you're in cuckoo land.
> I just find this topic frustrating since there are a large number of comments that display a complete misunderstanding of basic market mechanics
Yes, i find it frustrating arguing with you too. What's worse is that you think using industry jargon will intimidate others into thinking you know better.
With the prices I am hearing it's not about those who don't need it but rather those who need it and would like to have it but cant afford it.
If I want to move 10k lots through the market, I can afford low latency.
Let me rephrase then.
Why would anyone but HFT traders need to move 10K lots through the market?
No worries at all. I certainly didn't mean to imply any sort of a judgement; I just needed clarification.
"Why would anyone but HFT traders need to move 10K lots through the market?"
To a first approximation, it's never the HFT traders that need to move 10K lots. In commodities, it's big producers and consumers - Chevron needs to secure crude stock, ADM needs to buy up a ton of corn, some mega-farm (or co-op of large farms) wants to lock in a price on what they're producing, &c. In equities, it's institutional investors, hedge funds, and possibly exceedingly wealthy individuals, who have decided they want to hold many more or many fewer of something. It's clearly going to be a big player - transacting 10k lots of a stock priced at $10 would be $10 million. Most people - including HFTs - aren't trying to move millions of dollars in one direction in a short time. Those who are have resources, almost by definition.
"Quote Stuffing" is not the nefarious activity that Nanex portrays it as. It's generally the result of your algorithm screwing up. It provides no benefit to the trader and exposes him to risk - specifically, an HFT who is quote stuffing will always be at the bottom of the book. As a result, he won't get any retail fills, he'll only trade with informed traders who are buying up the whole book. It also lowers your fill rate, which can result in a trading halt or financial penalties.
As a result, most HFTs put effort into reducing quotes and making their algorithms more stable.
I shouldn't have used the term "conspiracy theorists". I just find this topic frustrating since there are a large number of comments that display a complete misunderstanding of basic market mechanics and a complete unwillingness to be specific. No shortage of moral posturing, however.