You might think it outlandish. But remember Nixon?
You'd have a point if the claims were outlandish and if the US govt weren't already known for persecuting whistleblowers.
If these are the experts then we're in trouble. Market makers don't suddenly rebalance large positions as described. In truth, market makers actually keep any positions they accrue hedged so that price changes don't lose them money. They do this all through trading - they don't build up a significant position and then suddenly dump it. They would suffer repeated losses and would soon be out of business.
Evidence? Consider this: market makers are almost always on the wrong side of the deal: when aggressors are buying it's because they think the price will go up - enough traders doing this is pretty good evidence that they are correct - it could be because another related instrument has already moved. Not only that, but enough sentiment can CAUSE the price to move. Whatever the reason, the market maker now has the wrong side of the trade - if they don't hedge it quickly it'll likely turn into a loss. If they just built up positions those positions would lose more money than the money made in the spreads. Market making is hard.
Other independent studies have concluded that market makers have been significantly helpful during falling markets, and helped prevent worse scenarios.
No - it actually is between different exchanges. It's impossible to do arbitrage in one symbol on one exchange.
If you're buying and selling a stock at different times, that's not risk free and it isn't arbitrage. It's also hard to see how it's bad.
You can. There isn't any restriction saying you can't sell to another party.
You can even do it at an exchange - submit a limit order instead of a market order at the inside market. Then you're in the role of a market maker.
HFT can't force you to trade with them. There is just a high probability because they are VERY good at providing liquidity.
This is bullshit too. All trades are regulated the same.
There are no do-overs... this is crap. Broken trades occur when the trade prices occur outside the NBBO, which is outside regulations. In other words, the trades weren't legal trades. The HFT company often loses money on these, and they always increase risk.
OK, here's the technical low-down:
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Because of HFT arbitrage, the prices are always very close to where they should be, such that there isn't much money to be made in arbitrage. You have to have very low costs to make any money at it. As a result, the two traders you are talking about are actually much closer to actual value than they would be without the overall influence of HFT.
HFT and automated trading are two terms without precise definitions. HFT can only be done by automation, though, so it's at least a subset.
So to say automated good, HFT bad is odd, to say the least.
HFT isn't in the middle and isn't an attack.
Actually, it takes much less than you'd think.
The hard part is the actual strategy... these days you need smarts in addition to the speed. Once upon a time speed was enough.
None, even to the HFT.
When HFT submits an order to an exchange it's out of their hands. The order could trade before any cancel arrives.
I don't know why people claim this is bad or a standard practice. It's neither.
By SEC regulations every order anyone submits has to be bona fide. If you don't intend to trade it's considered manipulation, and is illegal.
I prefer capitalism.
HFT comes in two major varieties: aggressive and passive. Passive is usually considered beneficial as it adds liquidity and is the reason the spreads in most symbols are only 1c almost all the time. This means that you and me investors can get our stocks within 1c of it's true value, excluding brokerage fees. Unfortunately the brokerage fees will be more than that - so I don't know why your mad at HFT. Further, without HFT the spreads would be much wider, e.g. 25c like the specialists used to keep them at, and you'd be paying the specialist 12.5c on average per share... Personally I'd rather pay the HFT company
The other main variety is aggressive, which normally takes the form of some kind of arbitrage. Arbitrage is generally considered beneficial because it aids price discovery and improves efficiency. It also takes money directly from the market makers (HFT profiting from HFT... confused?).
Both arbitrage and market making were around before HFT. HFT takes those strategies and makes them faster and smarter. They were inevitable... each speed advantage turns into more profit and less for the competitors. And more efficient markets.
There have been hiccups, but with circuit breakers, nothing damaging to the market.