Not a market maker issue

Post #388,264 by crazy 4/6/14 9:12:57 PM Reply	Not a market maker issue Distance to alternative venue issue. YOUR broker has paid for a single connection to a single exchange. HFT has paid for connections to many exchanges. If you want to by XYZ, and the last trade cost X dollars, and the local price is X+2, but it's X+1 somewhere far away, then the HFT trader can go grab it far away and offer it locally, slightly undercutting the local offer. This is good for the local buyer, bad for the local seller, and good to normalize pricing. So the local seller is PISSED, and demonizes it because the HFT just "stole" the difference. But HFT also saved the buyer some money. HFT drives down pricing arbitrage profits, which is why it makes less $$ every year as tech gets better and cheaper and more people can do it.
Post #388,265 by Another Scott 4/6/14 9:27:47 PM Reply	That makes sense. It still seems ridiculous to me that it's somehow sensible to run a market this way, though. Why not have an agreement among the markets that the market's active bid price will an average over the previous 5 seconds, and the ask price similarly over the previous 5 seconds. Or something similar. Why have a system that depends so much on speed when people in the real world don't? How do fast and wild price swings help the stockowners or the companies or the economy? They only seem to help the brokers who can play the spread in quasi-real time. It's crazy and invites wild swings by computers that will break down and will enter pathological states on occasion, as we have seen. This reminds me... One of my old bosses found a stock that regularly cycled between $20 and $40. It did it for years on end. He said he made quite a bit of money buying at $20 and selling at $40... (Of course, the cycle eventually ended.) That was over months, though, not msec. Cheers, Scott.
Post #388,267 by crazy 4/6/14 9:51:45 PM Reply	You can make pricing rules for the market makers, but not the independents. Someone may want to accumulate a stock over time. He can put in a variety of bids, different prices, active different amounts of times. Would you tell him he can't bid this way? Someone shows up in the market, needs cash fast, and offers more shares than the market maker can absorb. Must he price it higher due to the rule, and then get no buyers? Brokers have hundreds or thousands of clients that must take these orders and then send them up to the exchange, constantly. If you make it a law, it will only happen in the US, and then the trades will happen out of the US. Will you put capital flow controls in place to avoid this? Then the stocks themselves will move, and the US will simply be out of the game.
Post #388,268 by Another Scott 4/6/14 10:21:15 PM Reply	I knew it was complicated. Thanks. Still...
Post #388,297 by boxley 4/7/14 4:00:36 PM Reply	what the boss did is surfing the market quite a few stocks swing in a regular pattern, time the pattern and make some money. Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free American and do not reflect the opinions of any person or company that I have had professional relations with in the past 58 years. meep

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