It does but there are some real downsides:
Failures can cause exchange crashes big time. This has nearly happened a few times before.
Risk is centralised and multiplied.
HFT contributes to volatility.
Hurts long term investment by human brokers.
Failures can cause exchange crashes big time. This has nearly happened a few times before.
Risk is centralised and multiplied.
HFT contributes to volatility.
Hurts long term investment by human brokers.
- Can't failures be counteracted by having failsafe measures? For example, if the market goes down more than 5% in a few-minute period, the market temporarily shuts down for a cooloff period of several hours to diagnose what's happening.
- Isn't HFT irrelevant to long term investment, given that it erodes away short-term profit, leading to accurate pricing of the stock?
A failsafe/circuit breaker is a possibility but shutting down the market will affect confidence. I'd prefer to see a market operate on a tick basis I.e all trades for a tick are transacted in one go with a window between each tick and assertions before and after the tick processing.
Fair point with your second comment.