Mark Gritter (markgritter) wrote,
Mark Gritter

Wired Covers HFT, Badly

This month's wired has an article gushing about high-frequency traders' need for low latencies. It does a reasonable job explaining what HFT traders do. It commits journalistic malpractice by not pointing out where that money comes from.

Even if we take all the self-justification about "providing liquidity" at face value, who is paying for this service? Big long-term investors. Pension funds and mutual funds. Even brokerages. If HFT company A makes $1M in cash a day, that means other investors paid $1M too much (or got $1M too little) for their trades that day. You don't even have to know what HFT is doing to reach that conclusion. I'm sure if you asked them whether the supposed "liquidity" was worth that much to them, the answer would be a definite no.

These guys are parasites. They may be a necessary consequence of a free market. But they're not providing any service that couldn't be done more cheaply.
Tags: finance, rant
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