In summary, we don't believe HFT profits are excessive or excessively consistent. We censure illegal front running as strongly as anyone, but it has near nothing to do with HFT per se. Canceling orders in the process of providing liquidity is key to any sort of market making, whether HFT or not. We support the right of HFTs, or anyone, to try to guess the direction of the market, using order flow or any other public information. We not only support the right, we celebrate the successful exercise of that right as it adds to public welfare by making markets more efficient and lowering the cost of investing. Lastly, we believe markets are "rigged" in favor of, not against, retail investors.(Via Greg Mankiw)
-RW
Is the Market Crazy? Treasurys Are Screaming Crisis While Stocks Yawn
ReplyDeleteFor starters, if some firm or a cartel of firms (and we certainly have plenty of those today) wanted to rig the stock market, their job is a lot easier today than it was pre-crisis. That’s because stock volume is weak in the biggest names.
Joseph Ciolli and Lu Wang of Bloomberg News report today that only “1.8 billion shares traded each day in S&P 500 companies last month, the fewest since 2008.” Equally worrying, say the reporters, is that when the S&P 500 index “hit an all-time high on May 23, only about 20 of its 500 companies reached 52-week highs…”
A market index setting new highs while only 20 of its 500 components set new highs, i.e. less than 5 percent, is sounding the same alarm bell as the bond market. The rising tide is not lifting all boats or to put it in Wall Street parlance, this is decidedly weak breadth.
What could high frequency traders possibly have to do with this?
http://wallstreetonparade.com/2014/06/is-the-market-crazy-treasurys-are-screaming-crisis-while-stocks-yawn/