Hacker News Reader

Comment by vermontdevil | Hacker News Reader

Opponents of IEX, including the other stock exchanges, have argued that the structure of the new exchange will add unnecessary new complexities into an already complex stock market, and potentially end up hurting small investors.

Yeah they are really looking out for the small investors. How very considerate.

View on HN

It may seem counter-intuitive, but...yes?

Small investors benefit from HFT and related technologies, which is why, eg, Vanguard is pro-HFT. Investment banks are harmed by it, which is why, eg, Goldman is anti-HFT.

I have a pet theory that the articles about HFT are actually placed [0] by big financial interests. I have personally seen a trader at a bank feed a story to a reporter in a different product. That article was pretty fair, but it was on an uncontroversial topic.

I don't think the goal is to be deceptive, but the biases of the source are going to come through. Traders at banks are going to much more charismatic and gregarious than traders at HFT firms so it's not surprising that their story rings louder.

[0] I'm not talking about explicit quid-pro-quo arrangements, but something along the lines of http://www.paulgraham.com/submarine.html

Maybe. But how about letting the investors and market decide? These exchanges do not want competition and are hiding behind the "protect the small investors" schtick.

> how about letting the investors and market decide?

I basically agree with you, and the market has been deciding; IEX is currently the #2 ATS (colloquially "dark pool", but IEX has been publishing quotes). However, now that IEX is an exchange, their quotes become "protected", and all market participants are legally required to send orders to IEX if they're displaying the best price. It's now illegal to decide that you value a quick response or a higher chance of getting a fill over price and choose not to trade on IEX.

Liquidity in instruments other than equities (options/futures/futures options) is getting worse, not better. Wider spreads and less liquid markets actually do disproportionately affect smaller investors who are doing anything other than straight equity buying and selling. HFT isn't hurting liquidity and isn't nearly the problem it once was, and this doesn't do anything to address the actual problems in dark pools or auctions or the non-transparent part of the market.

Reply on news.ycombinator.com