I'm not sure about subsecond windows, but 24 hour windows certainly matter. Say you're planning on making a big order of lumber for your mill and you're ordering from a market with zero speculation so the prices jump up and down with the supplier's inventory. It makes a lot of sense then to wait a few days (during which your machines and workers are idle) to get the best price possible. I'm not going to say that high frequency trading serves a useful purpose, but to me that looks like a zero-sum struggle between Wall Street firms for profits that Wall Street deserves for doing its thing on a minute to minute or hour to hour level.
Ok, fine, downgrade 24 hours to 1 hour. Nobody cares about those prices within 1 hour. We've had markets that operate within 1 hour for over a century.
What did all the "innovation" actually produce? I know Wall St is making more money but are they providing more value?
High speed trading is only relevant to the competition between market makers and other short term speculators. It has no effect on long term speculators/hedgers/etc.
If you want to trade right now, you will pay a few cents/share for the privilege (this is the spread). If my company was fastest, we sit at the top of the order queue, and we will receive those few cents/share. If GS was faster, they get the pennies. Either way, you trade right now. And if I decide to cut in line by offering a better price, you trade right now for less.
Comments
I'm not sure about subsecond windows, but 24 hour windows certainly matter. Say you're planning on making a big order of lumber for your mill and you're ordering from a market with zero speculation so the prices jump up and down with the supplier's inventory. It makes a lot of sense then to wait a few days (during which your machines and workers are idle) to get the best price possible. I'm not going to say that high frequency trading serves a useful purpose, but to me that looks like a zero-sum struggle between Wall Street firms for profits that Wall Street deserves for doing its thing on a minute to minute or hour to hour level.
Ok, fine, downgrade 24 hours to 1 hour. Nobody cares about those prices within 1 hour. We've had markets that operate within 1 hour for over a century.
What did all the "innovation" actually produce? I know Wall St is making more money but are they providing more value?
High speed trading is only relevant to the competition between market makers and other short term speculators. It has no effect on long term speculators/hedgers/etc.
If you want to trade right now, you will pay a few cents/share for the privilege (this is the spread). If my company was fastest, we sit at the top of the order queue, and we will receive those few cents/share. If GS was faster, they get the pennies. Either way, you trade right now. And if I decide to cut in line by offering a better price, you trade right now for less.