Financial blogger Kid Dynamite has a great take on the real impact of HFT and blasts Chris Sparrow, a misinformed high frequency trading “expert” on many key points.
Some extracts from his post, the whole of which is well worth reading:
Sparrow complains that information distribution is unequal:
“It’s a fact of physics that someone will always have the information first. I covered this more than two years ago and I see no reason to rehash it … The current disparity of ‘temporal access to information’ has been narrowed from 20 or more minutes to fractions of a second. That cannot possibly be the problem.
Sparrow claims that investors are losing confidence in today’s markets:
“We keep hearing about how investors are/(should be) losing faith/(confidence) in our markets. The main reason they’re losing confidence in our markets is because people keep telling them that they should lose confidence in our markets. Guess what – the retail investor positively DOES NOT CARE if some HFT algos want to quote a stock a million times a second. Seriously – it has ZERO impact on us – we can’t even see it!”
Sparrow complains that HFT creates fragmentation:
“[Addressing price discrepancies across fragmented markets is] precisely the role that many HFT algos fill: arbing prices and maintaining order across trading venues – a necessity due to fragmentation! Market fragmentation occurred when firms began competing with the NYSE … “How do you put the fragmentation genie back in the bottle?”
Go and read the rest of this post so you’ll be armed with plenty of great rebuttals the next time someone takes you to task over the “evils” of high frequency trading as popularized by most of the mainstream media these days.
To read the original article, go here now:FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!