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Comment by harryh | Hacker News Reader

I can quickly and succinctly describe the traits and benefits of HFT:

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.

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That's not what High-Frequency Trading means. The terms for what what you describe are the more general "electronic trading" and "automated trading". They enable HFT, but are not HFT.

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.

I believe that you are making a distinction without a difference. Operating over extremely short timeframes is what allows electronic traders to provide such efficient pricing.

The distinction I am making means everything. It enables "Latency Arbitrage." It allows HF traders to see trades that are about to happen before they actually happen and cut in front if it'll be profitable.

http://blogmaverick.com/2014/04/03/the-idiots-guide-to-high-...

That blog post does not accurately represent how markets work. It is not possible to see trades that are about to happen that have not happened yet just by being faster. You can react to past trades faster than someone else. But no matter how fast you react, it doesn't mean you can see the future.

We're getting off track. The point is that the value of HFT is disputed. You claimed HFT reduced buy/sell spreads by a factor of 10, which is obviously false once one distinguishes HFT and Electronic Trading in general. If you're unwilling to do anything but deny the difference between HFT and Electronic Trading there's no point in having a discussion about HFT's benefits.

No one (including you) has presented any meaningful distinction between HFT and Electronic Trading in general.

For the record, I think the vast majority of people's arguments about HFT are simply about the definitions of what HFT is. It isn't clearly defined anywhere and the blog post you linked earlier certainly doesn't capture any definition I've seen used in the industry.

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.

> HFT is not about being faster than "slow expensive humans" it's about being microseconds faster than other HFTs.

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.

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