Lots of things are illegible to the public. Explain to me all the processes involved in building the smart phone in your pocket. You can't. I can't. Probably no single person in the world can. Who cares?
It's not clear.
Yes it has, but why would you consider that a good thing? CAFTA and NAFTA have been pretty horrendous for the finances of Americans and TTIP and TPP are likely to be even worse.
They can't be killed unless enough people understand them, either.
Whereas, with HFT...
Edit: As Harryh said, large mutual fund managers believe that HFT allows them to get better prices for their customers: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...
Ballpark esitmate: drop $20k/year into retirement (1 lot of SPY/year) x 1 penny/share being robbed from you x 50 year working career, you've lost $50 to the evil HFTs.
Ballpark figure, of course.
https://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annua...
Which is probably more relevant than AAPL's net profit.
Anyhow, HFT affects execution, 'electronic trading' affects how you put in orders, both make the process of buying/selling securities cheaper.
Such markets are created specifically for the purpose of avoiding HFT: https://en.wikipedia.org/wiki/Dark_liquidity
HFT hasn't been around that long, either. Before 2005 it basically didn't exist.
Dark pools are beneficial to institutions in some circumstances, not to individuals.
And yes HFT hasn't always existed, once upon a time you'd have a pit of screaming traders and brokers, and for an individual to buy/sell stocks you'd have to call your broker on the phone, who'd charge you an obscene amount for the privilege.
Anyhow, HFT is more or less just a euphemism for high-speed arbitrage/market making.
I look at the execution I get on my trades today, I couldn't imagine not having that service available.
Yes, to hide them from HFT.
Read on a little.
I'll tell you why they use dark pools. On the open market, if you sell lots of shares, buyers will see that, and drop their bids. Likewise if you put in a large bid, sellers will raise their asks. In a dark pool, institutions can move large blocks at a given price without market forces interfering, and reduce trading costs.
It's like the difference between searching for a house on a public database, or a broker's private database...
What point are you trying to make about them? That if we didn't have HFT, we wouldn't need them? That's an argument for HFT, not against.
>That if we didn't have HFT, we wouldn't need them? That's an argument for HFT, not against.
Dark pools are an evolved defense against parasitic market players that is not cheap. These costs are then passed on to you via your pension fund, index fund or if you buy insurance.
I don't see how that's an argument for them unless you or your friends were personally profiting from it.
You and I buy stocks in small amounts. Intuitively, after each of our trades, we understand that the market moves to take the impact of those trades into account. That's the point of markets!
So why on earth should it be that a hedge fund should be able to buy or sell huge amounts of stock without having the market move? You don't have that power. Why do they? The fact that a giant entity is trying to move huge amounts of stock is information. The point of the market is to capture that information and build it into prices. That's exactly what HFTs are doing in this scenario.
The expectation that hedge fund managers have that they should be able to capture the spot price of a security and then buy or sell arbitrary amounts at that price, taking their information advantage out of the hides of every other market participant, seems totally unfair. Again: you don't have that privilege on the market. Why do they?
That great innovation where you no longer have to shout in a pit to get your trade executed because, you know, computers.
Virtually all trading these days is electronic.
>And HFT is
Algorithmic trading by computers that's "fast" (usually regarded as sub-second trading, although definitions vary a little).
The more you know...
For instance: Google [odd eighths scandal].
And that's a modern example of humans rigging the markets, exploiting lack of competition and automation. Things get much worse the further back you go in time.
Humans are of course perfectly capable of rigging the market with or without computers, a fact so mind-blowingly obvious, I'm not sure why you'd accuse someone of believing that it's false.
This particular thread was not about market rigging, it was about whether HFT can really be credited with decreasing spreads in the early 00s.
You have not described a difference between two things that you are trying to distinguish between.
That's not true, not like HFT anyway.
First, you can quickly and succinctly describe the traits and benefits of a smartphone. You can be high-level at first, you don't have to explain how every detail works. There's no question, for example, that a touch screen doesn't actually work as advertised. You can just say that a smartphone is a cellular/wireless computer device with a usefully large touch-screen display.
In contrast, the unknown question with High-Frequency Trading is: is it actually providing value to anyone but the traders themselves? They might say they are "market-making" but are they really market-making (a trading role with proven market value) or are they merely exploiting structural inefficiencies in the trading infrastructure that mostly hurt everybody else? Maybe they are, but they should be able to describe it in a high level terms first (market-making, liquidity, etc.) where their role provides an obvious benefit to the market, and if you don't understand the high-level terms (eg liquidity) you can look them up.
So far as I can tell (and I am willing to be proved wrong here) there is no consensus answer to the question of whether HFT is actually valuable to markets.
Replacing slow expensive humans with fast and cheap computers has dramatically reduced the cost of trading. You can see this because buy/sell spreads have shrunk by at least 10x.
High-Frequency Trading, while also an umbrella term, virtually always refers to a subset of algorithmic trading involving arbitrage over extremely short timeframes. HFT is not about being faster than "slow expensive humans" it's about being microseconds faster than other HFTs.
http://blogmaverick.com/2014/04/03/the-idiots-guide-to-high-...
In my experience though, electronic market making, which I regard as a very good thing, is a direct subset of HFT. To do it properly you must be fully automated, fast, across venue and trade alot. By nearly every definition I've seen that makes you HFT.
Now, HFTs are competing with other HFTs, but initially, they were competing with "slow expensive humans". The current situation only tells you how far we've progressed.