It is now generally understood that high frequency traders (HFTs) are dominating the equity market, generating as much as 70% of the volume.
... HFTs collectively execute billions of shares a day, making it an extremely profitable business.
- HFTs provide low quality liquidity.
- HFT volume can generate false trading signals.
- HFT computer servers are faster than other trading systems.
Because most HFT servers are co-located at exchanges, they can beat out institutional or retail orders, causing them to pay more or sell for less than they should have for a stock.
Then there are the "what if" problems that could be created by HFTs:
- What if a regulation like the uptick rule were enacted?
- What if a "rogue" algorithm entered the market?
I'm left wondering, though, if the whitepaper's authors (Themis' co-founders Joe Saluzzi and Sal Arnuk) really are "equity trading experts who appear regularly on Bloomberg TV and CNBC," why haven't we heard about this before?"
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