It’s my naive understanding that HFT makes money at the direct expense of other market participants. Is this not a downside? I’m genuinely curious to the arguments against this.
If I own shares in a company for 20 years, that means someone else who sold them to me doesn’t own those shares and doesn’t earn those returns.
HFT is just one form of algorithmic trading, they're not the same thing.
Like many service providers, to a lot of people the service provided is worth more than the cost.
Does the average trader whose orders these HFT firms fill actually have a choice in the matter?
Certainly big institutions do with desk trading, but to my knowledge the vast majority of us do not have any choice in who fills an order or whether to wait a little longer not to participate in market making.
Nice stock you have there, it'd be a shame if ya couldn't sell it...
Take your pick. Start your own.
This is like saying you have the free choice not to have a phone number or email address. Yeah, technically you do, but effectively you have to use the system. And for the most part you get that from private entities too.
What you refer to sound more like brokers that offer online trading services, it's "instantaneous" but not fast enough to enable the latency scam used in HFT.
Maybe 10 years ago, but these days (outside of very specific markets) most of the big “HFT”s are really doing quantitative trades or market making.
> that is not available to general public
Collocating with a venue is expensive and clearing membership of an exchange has capital requirements, but it’s not some old-boys club; anyone with sufficient funds can take part.
It’s not available to the general public to exactly the same extent that exchange membership isn’t available to the general public.
Why on earth do you care who fills your order?
If you place a GTC/Day limit order, it will fill at the price you deem fair, or better.
If you enter a transaction to deal a quantity of a security at the price you deem fair, what difference does the nature of the counterparty make?
I disagree, I think I could have skipped the "or better" without making a substantive change to my point.
Is your argument that the presence of HFT participants (or really electronic market makers) leads to reduced price improvement for other participants?