HF trading provides liquidity and there is some debatable value to that purpose, but using the speed of light to profit from traders who didn't pay the toll to be closer to the marked pretty clearly doesn't benefit anyone but those in on the scam.
Literally how do you compare the debatable liquidity value to the debatable cost to those who didn't pay the toll? Why are those who didn't pay the toll more deserving and necessarily more benefitting to the economy? If there is increased liquidity aren't the non-HFTs starting at a lower price than they would've, even if part of their order is more expensive? I'm asking honestly, I don't know either way.
High frequency trading does lots of things and only a few of them are being highlighted as bad. There are a specific set of legal advantages which can be had by being physically close to an exchange which give unfair advantage.
If the speed of light was infinite, these advantages would be clearly and unbeatably illegal: in essence the high frequency traders are paying huge sums of money to impose a delay on every other trader resulting in foreknowledge of events.
As a hypothetical high frequency trader, I could see that you have placed an order for a million shares of Apple, because of my positioning I can execute my own order _before_ yours goes through raising the price a tick and then selling those stocks to you. If exchanges allowed this and profited by it by erecting artificial delays it would be extraordinarily immoral, but because it's a natural delay it is still illegal.
The problem is that laws didn't catch up with technology, and as stated before the whole thing is complicated and not so easily understood and there are a _lot_ of money in it.
This has nothing at all to do with the separate issue of high frequency traders providing liquidity... they can do that without a time delay advantage over everyone else.
> If exchanges allowed this and profited by it by erecting artificial delays it would be extraordinarily immoral, but because it's a natural delay it is still illegal.
This sounds a lot like "if casinos used XYZ poker strategy clearly it would be illegal, but for some reason we let other players use it!" Well, of course, they're players, no?
> This has nothing at all to do with the separate issue of high frequency traders providing liquidity... they can do that without a time delay advantage over everyone else.
Can you explain this more? Not sure I fully understand.
