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High Frequency Trading and Systemic Instability
After the New York Times ran a
story, High Frequency Trading (HFT) has come under increasing scrutiny. While
most commentators rightly focused on the exploitative effect of HFT on the
persons on the other side of the trade, there is a more abstract view that
provides food for thought.
If the stock market be considered
as a system, its output is price. Ignoring the fact that any market has
hundreds of types of securities being traded at the same time, imagine a market
where there is only one type of security being bought and sold – say for
example a market that only trades April 2010 futures contracts of the S&P
500. The price of these contracts, as ‘found’ by the market, is its output.
Without the existence of HFT,
individuals place orders and monitor results. In such situations, there is
considerable lag between the time when a limit order is placed and the time
when the market approaches that limit (if at all).
The placement of an order is a
perturbation which causes the system to deliver an output – the price, or
specifically, the price for the given trade. This output causes other orders to
be placed or cancelled. The system goes through multiple loops before the limit
from the limit order may be approached.
Since it takes place in human-time
(timeframes in which humans can understand what’s happening and act accordingly),
bears get the opportunity to counteract bullish orders and vice versa,
providing negative feedback for at least some of the individual loops. This
imparts stability to the system.
High Frequency Trading causes the
market price to approach the order limit much more rapidly (this is explained
elaborately by Karl Denninger at http://market-ticker.org/archives/1259-High-Frequency-Trading-Is-A-Scam....).
With HFT, this movement no longer takes place in human-time but in near real-time,
which means humans can neither monitor the movement nor take corrective action.
Furthermore, algorithms are based
on differentials (in this case the difference between the market price and the
order limit) and are free from beliefs and biases (bullish, bearish etc.) Thus
multiple HFT entities will tend to spot the opportunity and jump in at the same
time and in the same direction (which may be long or short). As this takes
place in a timeframe that is too short for humans to monitor and take action
in, the effect will be to amplify the perturbation – positive feedback!
If there’s one thing every
engineer knows, it is that positive feedback tends to rapidly make a system
unstable. The Wikipedia entry on positive feedback explains it well: ‘The end
result of a positive feedback is often amplifying and "explosive,"
i.e. a small perturbation results in big changes. This feedback, in turn, will
drive the system further away from its original set point, thus amplifying the
original perturbation signal, and eventually become explosive because the
amplification often grows exponentially (with the first order positive feedback),
or even hyperbolically (with the second order positive feedback).’
Interestingly, this makes price manipulation much easier.
Instead of bulls fighting it out with bears at every step, an entity that seeks
to push prices higher will place a large order with a limit price substantially
higher than the market price, letting the HFT entities jump in and do the rest.
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Just an ignorant question, does HFT simply increase velocity of trading, simply compressing the timeline of the stocks' natural, market driven movement, or does HFT accelerate trading, thus creating greater volatility than would be natural, market driven.
Don't get me wrong, I have other issues with HFT, but I'm wondering how harmful quickened trading is? It seems to me it is detrimental to fair market in short term, but is it truly destabilizing?
It accelerates trading, causing greater volatility than would be natural and market driven. Read the piece by Karl Denninger (linked to in the article) for a nice explanation.
thanks, will read...
GT Wrote:
"...when the real rationale is that the US should not be there because blowing people to bits for having the 'wrong leader' is morally repugnant and leads to systemic instability in repeated games... as 911 shows, people get sick of it and take retaliatory action which is usually unpleasant."
With that repugnant statement you have illustrated that you don't have a clue as to the threat faced by the entire world. You surely have never read Pulitzer winning, "The Looming Tower: Al Queda and the Road to 9/11", or "The Forever War", or "Surrender is not an Option" (Ambassador Bolton) or "The Nuclear Jihadist" who has made the Middle East a Walmart of nuclear proliferation.
To state that 9/11 was "retaliatory action" is the height of ignorance on the topic. The war started in 1948 (nothing to do with Israel) and the construction of the Muslim Brotherhood, that morphed into the Mujahadeen and into Al Queda, that decided that the entire West was an affront to their "Allah." Carter deposed the Shah and brought in Khomeini who, if you read "The Persian Nights", removed any loyalty to Iran, but rather only to the Koran and the death and destruction of anything not Islam. Now, Achmadinejad feels he is compelled to bring on the Apocalypse and the "12th Iman" who fell down a well. You think you can negotiate with people like this? No, you KILL them. And US Marines do a damn fine job of it!
We face a greater threat than that from the Nazis and Europe is being bred from existence (Mark Steyn, "America Alone"), and Islam does not live in peace with any land it arrives in once it reaches 20% of the population.
I'll dedicate this post to my friend who told his wife he loved her as he jumped from the top of the WTC to his death. At no point were we struck because of what "WE" did. The plot to destroy us was hatched long before even the Iran Hostage Crisis. We were struck because for over 20 years we showed weakness. And we are showing it again with the election of a weak president who embraces dictators. You might wish to get a clue of what you are speaking about before you condemn the actions of America and side with those who we "forced" to strike us. In case you haven't noticed it, the history of the world is tyranny. And once again, only the United States stands between a long dark age and freedom.
Socrates
P.S. I guess "The wrong leader" was perfectly justified to put husbands through a shreader and send the remains to the widow. You must have also turned your head to Rwanda and the Sudan. Not your problem, right?
I am a missing something or are you conflating response to 9/11 and invasion of Iraq? Even neocons now admit Saddam H had nothing to do with 9/11 and even the ones, like Cheney that still try to claim this, even if you believe all they say, Iraq/Saddam had very little to do with 9/11 and it would have happened with or without them/him.
I have no argument with your general thesis there are non-western, Muslim people such as Arabs, Palestinians (which I believe most would consider Arabs), Persians, Indonesians, etc..that hate, and have hated us for a long time, for political, nationalistic, ethnic, and religious reasons, often with all the above mixed together. I also have no argument with your implied claim we should be defending ourselves vigorously against those that are plotting to harm us and to use our law enforcement, intelligence, and even military to address those that want to commit violent acts against us.
Having said that there are those that hate us, that they are organized, and that we should defend ourselves, I will also say I think it is wrong to ignore all grievances of the moderate element of these people, that may despise us, but are not actively trying to destroy us, and I think it is wrong not to, at least, research and consider the roles of US bad acts that have had in the history of this clash. Surely you are not so naïve to think the US has not done anything just straight wrong, or unfair in relation to Muslims, Arabs and Persians over the last century?
As an example, for someone so well read, I'm surprised you start your discussion of US interaction with Iran by starting with Iranians taking US hostages. I think it was wrong that Iranians did that, I think it was in our right to try to defend those people, and extract them. I can even see how many nation states would rightly see that as an act of war and retaliate in a war.
Again, having said that, do you think Iranian revolution would have even happened, or happened that way, if the CIA had not first taken out Iran's nationalistic leader, Mossadeq, in 1953 and propped up the Shah. Given Iranians were aware of the US involvement in replacing their chosen leader with a tyrant, the Shah, it seems naive to think this cultural memory had nothing to do with the acts of the revolutionaries 20 years later. If Mossadeq had not been taken out in a CIA coup and the Shah not put in power, would Persian’s had a revolution or would they had made moderate reforms towards more, or maybe even less, religious influence in their govt? Even if they still did revolt against Mossadeq or his successor, would they have been as motivated to go after US embassy if they saw US as a neutral, non-bad actor in their countries affairs.
Again, I don't think taking the US hostages was right; even our past bad acts do not justify such acts. The US embassy officials could have been simply expelled from their country at which point they would have been no threat to Iranian people. However, I don't think we can conclude definitely Iranians would have declared war on us in that manner, if we had not first 1) taken out a their popular nationalistic leader 2) supported his tyrannical replacement for many years.
I think it’s important to not always see the bad act of others toward us as having emerged from alternate universe time-space warp completely unrelated to any past behavior by us. I had a self-admitted, hot-head roommate once that would needle at me over petty things, over and over again, almost like she was unconsciously looking for what button she could push on me to get a reaction. Being a laid back person and having respected and complied with any requests she made in regards to our living situation, she had little really to complain about. However, a few times she got to me, and I reacted… I did get heated to the point of snapping back at her with a tone and raised voice. At that moment she always freaked, stomped off, and seemed to only see me suddenly, out-of-the-blue yelling about nothing and was completely affronted by my unprovoked (in her mind) bad behavior towards her. She seemed to always think I started it, she never saw my actions as reactions to her. Her failure to see her part in this dance seemed even stranger because she knew she was no hero and she had anger issues. Given this, it seemed strange she wouldn’t at least occasionally suspect her part in the blow-up.
I feel all of us are susceptible to such blindness to the effects of our actions, to the point where we will kill someone who killed our kin, never dwelling on the fact that that other person that killed our kin may have had same reason for their killing of our kin.(Here I’m not talking about 9/11, but our larger interactions with Muslims, Arabs, Persians). I totally agree with you that we should not tolerate uncivil, violent acts of others against us and I also think we should also hold ourselves to the same standard by which we want to be treated. We should not kill innocents that had no beef with us and did not attack us. It is not right for some Al Q recruit who is ticked about our support of Israel its abuse of Palestine to then kill 300 people in NYC. Conversely, it is not right for us to kill innocents in Iraq because of 9/11 that they had nothign to do with.
If we want more than just revenge but rather long-term security then we must both protect ourselves and also not react disproportionately violently. We should also understand, each of our violent acts that effects innocents and each of our interferences other peoples national politics will breed some resistance, as most people are not non-violent saints and most, when feel wronged, will often act out on this. As an example, a really good person like yourself, a civil US citizen, probably way up on the bell curve of morality amongst the whole of the human population, even you can be made to want revenge when you feel someone you know was innocently slaughtered, and your desire for revenge can be so compelling that it may be indiscriminate in where it is directed, and you may not really care much if 10,000s of innocents in Iraq die in your pursuit of Al Qs members who did actually commit 9/11 attacks.
If you, a civilized moral person could be pushed to such behavior, surely less moral, less saintly others will react the same way or worse when an innocent close to them is killed. Given this, it seems we should be on guard to use the least amount of violence needed to get at those attacking us, and try to minimize the amount of innocent deaths. Attacking Iraq when Saudis from Germany, Egypt, Saudi Arabia, Afghanistan were the masterminds and foot soldiers of the 9/11 attacks and their organization that made it possible AL Q, was based in Afghanistan and Saudi Arabia, seems like a very bad move in terms of our long-term security.
Not informing ourselves of, or acknowledging, any of the grievances of others also seems like a great way to further goad and expand the base of folks that hate us and want to kill us. Addressing legit grievances, avoiding disproportionate and indiscriminate violence, and avoiding new bad, provocative acts towards those that might war with us seem like common sense ways to work towards our own security.
Thanks for your well reasoned reply. While we put the Shah into power, and we removed him as Carter put in the seeds of our problems with Khomeini, much of the Western world felt that we saved the Middle East from rule by the Nazis, and that we brought the technology and the risk to of searching for oil to them, and their investments nationalized was wrong. I'm not going to defend Eisenhower's decision to overthrow Mossaddeq as I recall from an article that they offered Britain a 50/50 split which was turned down. But is that important at this moment? I would say not at all. This remains, like it or not Dubya, a religious war. Pakistan has 45,000 madrasas teaching virtually only the Koran and mothers hope they can kill Christians and Jews to be with their Allah (Jessica Stern, CFR, "Terror in the Name of God: Why Religious Militants Kill"). If we do not at some point have Iraq survive on its own and take the route of a secular Turkey (which is fighting militant Islamn also), then I think Bush will have made a valient effort, but history will not treat him kindly nor will the world survive in peace. Conversely, Harry Truman lost around 36,000 American lives in Korea with 8,000 MIA. He left office a despised man. But he is now seen as one of our greatest presidents for standing up against communism. Will History treat Bush the same way? It's hard to say with what I view as a coward as commander in-chief left in charge of the job. WW I was an unthinkable bloodbath. 40,000 dead at Verdun in one day alone! One nuclear bomb can make for a very bad day too and dwarf those numbers.
If you really, truly wish to discuss this might I suggest that you go first to the Frontline site (no friend of Bush's) and watch "Bush's War." It will be unlikley that were you in the Oval Office that you would not have also attacked Iraq. There is also a VERY good chance that Iran gamed us and got us to remove their rival. The Persian mind has long been a sharp one when it comes to battle.
Unfortunatley, Paul Bremmer was singlehandedly, without authorization, responsible for turning much of the former Baath party against us. No clear thinking person thinks the Baathist would not have aligned themselves with "the strong horse", but Bremmer fired them all (no income) and shut down the Iraqi military. 7 days later the first IED exploded.
In the Frontline piece you'll see that Bremer denies meeting a retired General sent there to help rebuild Iraq for 90 minutes who begged him not to take both steps.
Was Iraq involved in 9/11? If at all it would appear to be only tangentially. Did they have a covert arms race going? We discovered that Saddam was a paranoid as Nixon and his taped conversations showed that their duel use program, and their food for fuel program, was aimed at acquiring WMD.
I'll go as far as saying that if you watch the Frontline piece you'll see Bush was given no choice from the information provided to him. He had to default that Iraq was pursuing WMD and possibly involved in 9/11 and it was widely known that he would have loved to have attackeed us. We are not talking about a leader loved by his people. And now Obama's best racial buddy, disgraced Gen. Colin Powell, is probably the strongest link to ourr going to war. Powell was thrown out as Secretary of State by John Bolton's actions after he acquired the information that at State, the joke was that Powell had a Marshall Plan for a legacy. Powell was running, "The Colin Powell Legacy Program" and decieving Bush and not following his instructions.
It's kind of of tough to fight a war when your own Secretary of State is underminding you, the media is treasonous, and the democrats want you to lose. I scanned a book here by Timmerman, "Shadow Warriors: The Untold Story of Traitors, Saboteurs, and the Party of Surrender", that essentially exposes the traitors in our government who for political and power purposes, wanted us in the war and wanted us to lose.
What good has come from the war? Let me first state that I'm not a Bush fan. His keeping the borders open, his refusal to free the border patrol agents Campanos and Ramos (because a friend of his was the prosecutor) and his letting the Pendleton 8 rot in cells thanks to ABSCAM pig John Murtha, are his darkest deeds. But we need a base in the Middle East where we have to hope that freedom spreads and despotss are overthrown. If Obaama now loses Iraq he owns that loss. But it may well be our greatest loss as we try rto live with a nuclear Middle east that wishes to kill us.
We overthrew a despot and his two pyscopathic sons. Although Obama will surpass Clinton and will attain the status of our worst and most incompetent president, at least Clinton understood the threat of Husssein. And we did not just go to war for WMD. I think there were 17 violated UN Resolutions as well as Hussein paying $35,000 per shahid (talking your child into blowing their head off their body as they killed Jews) that was stopped.
Legendary British military historian John Keegan. "A History of Warfare", did a series where the lying leftist Watler "We lost the Tet Offense" Cronkite narrated. Keegan close, in 1999, by stating that is we did not rein in the nucleear prolifertation that was growing, "the future holds a bitter harvest indeed for future generation." Like it or not, stopping Hussein slowed the nuclear arms race. Wherther we prevent it is, IMO, unlikely. We have been hated for years. Despite the despicable Great American Apology Tour by Obama, that is making us look weaker to an enemy who thrives on weakness, this is the greatest war in our nation's history. For the previous poster to claim we got what we had coming iss an insult to those 3000 lives. All we have asked of any nation, in a world where conquest has been the rule, is some room to bury our dead.
Socrates.
P.S. I don't carry a badge (almost did) but I carry a gun as duly licensed, always. Each year starting around October, I am the point man for something I started that now involves the Marine Corp League and it's grown from 500 pounds and 50 letters, to a deployed unit last years in a hot spot in Afghanistan of 4 tons and over 500 cards and letters. What am I doing? What every patriotic American would have been doing in WW II. And I have to pull teeth to be able to get the funds to ship what we have been able to collect to marines that last tour lost 5 young heroes. We are not a perfect nation. In fact, I think right now that we are a great people with the worst giovernment we have ever been subject to. They want our money, our freedom of choice in many areas, and our guns. We are well past John Locke's 5 points that mandate a people replace their government. Hopefully, that will be done in wide scale in 2010 and the new party will understand that we have had it with the corruption and incompetence. I do not sleep tightly in my bed, nor do I feel secure for my children, with Pelosi, Reid, Murtha, Obama, et al in charge. "The Kenyan" wants to be loved. We had better be feared if we are to be safe. I do you have read Mark Steyn's, "America Alone" as its 200 pages speak brilliantly of how we need to not care what a European, or what I believe was a New Zealander who I responded to, think of us. Their cowardice lost their nation. And Mark Levin's 200 page treatise, "Liberty and Tyranny", has now sold 1 million copies for a reason. We still have men and women who think this nation ais great and are willing to defend it. Sadly, they don't reside in the WH nor in the halls of the Congress on the left side of the aisle.
As Eddie Murphy said in "48 Hours", "I don't hate you because I don't like you. I hate you because you're going to get me killed."
Wow! Has nobody noticed HFT front running has been going on for years.
Please see the filings in the lawsuits Jim Simons' Renaissance Technologies - another vampire squid - filed against its former traders Belopolsky and Volfbeyn.
See this 2007 Bloomberg report:
"Volfbeyn said that he was instructed by his superiors to devise a way to ``defraud investors trading through the Portfolio System for Institutional Trading, or POSIT,'' an electronic order-matching system operated by Investment Technology Group Inc. Volfbeyn said that he was asked to create an algorithm, or set of computer instructions, to ``reveal information that POSIT intended to keep confidential.'' Refused to Build: Volfbeyn told superiors at Renaissance that he believed the POSIT strategy violated securities laws and refused to build the algorithm, according to the court document. The project was reassigned to another employee and eventually Renaissance implemented the POSIT strategy, according to the document. New York-based Investment Technology Group took unspecified measures, according to the order, and Renaissance was forced to abandon the strategy, Volfbeyn said. Investment Technology Group spokeswoman Alicia Curran declined to comment."
According to the order, Volfbeyn said that he also was asked to develop an algorithm for a second strategy involving limit orders, which are instructions to buy or sell a security at the best price available, up to a maximum or minimum set by the trader. Standing limit orders are compiled in files called limit order books on the New York Stock Exchange and Nasdaq and can be viewed by anyone.
The redacted order doesn't provide details of the strategy. Volfbeyn refused to participate in the strategy because he believed it would violate securities laws. The limit-order strategy wasn't implemented before Volfbeyn left Renaissance, the two men said, according to the order."
See http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agxVXC.r9Edw
xxx
WMW
I disagree that HFT can create long-term instability: while the systems 'output' may well be price, that price is anchored (somewhat weakly, short term) to economic performance of the underlying entity (the company or companies whose stock/s are being traded).
At some point PRIOR to prices exploding toward infinity (or collapsing toward zero), valuations will become massively overstretched (or over-compressed) and the orderflow on which HFT piggybacks will start to bet against the direction in which HFT is pushing the market.
So to go to your one 'stock' example (the April 2010 SP futures - although ES/SP is HMUZ which means it only has March, June, Sep and Dec expirations), the S&P's underlying companies have economic prospects which are used by 'investors' to form their expectation as to a 'reasonable' price to pay for that contract.
If HFT caused the price of the contract to diverge wildly from the range of price expectations, rational investors would bet in the opposite direction - simple as that. (Note: this is the same rationale which leads me to believe that short-sellers can never - EVER - destroy a company with sound fundamentals).
Your assertion regarding feedback characteristics is a classic example of why 'engineering' solutions to economic problems never work - they fail miserably to account for underlying human motivations... the best example is that making cars safer causes pedestrians and cyclists to die in larger numbers, for example - drivers, in 'feeling' safer, will 'trade away' some of the increased safety for increased risk-taking. (The best solution for road-toll reduction, therefore, is not an airbag, but a killing spike that kills the driver any time he rear-ends anything).
The feedback you speak of assumes that prices are generated by some autoregressive process with an unstable root - whereas in fact they are generated by an ECM (error correction mechanism) where the long-run relationship is some function of the underlying economics of the company. That is the 'attractor', and the ECM parameter vector is stability-inducing (i.e., its root vector is less-than-unit).
Now I am not saying that investors' assessments of the underlying economcis of each company are always sensible (so the long-term attractor is a moving feast). Investors have to form expectations regarding the business outcomes for the entity, and the mechanism by which those outcomes translate into cash flows to equity... which is hard.
So anyhow - without inundating the commentstream with algebra, let's just say that you can't decry HFT on the basis that is leads to price instability or a systemic market failure; it will not do so. (It will lead to increased volatility of the path to the long-term attractor)
Instead, we ought to focus on the notion that it is undertaken using information that is seen by HFT bots BEFORE it is disseminated to the market - that is, it is a form of corruption. AS usual, this information asymmetry is a direct result of government favouritism - only those with the appropriate license can get hold of the information to exploit HFT.
In this sense, it is a bit like the olden days in Australia, during which only broker-dealers were able to 'see' some types of order (and the broker ID behind them): at the time there was no price that I could pay, that would entitle me to view 'broker level depth' - unless I was prepared to join the broker's union (which called itself the 'Securities Institute' or some other euphemism, but it was a union... just like the AMA).
To my way of thinking, people who attack HFT for it's supposed market-destroying capacity are focusing on the wrong issue: they're like people who say the US should not be in Iraq because it costs taxpayers too much... when the real rationale is that the US should not be there because blowing people to bits for having the 'wrong leader' is morally repugnant and leads to systemic instability in repeated games... as 911 shows, people get sick of it and take retaliatory action which is usually unpleasant.
Concentrating on the wrong symptom (a nonexistent risk of systemic instability) will lead to the wrong remedy: if we want to stop the ability of favoured firms to profit from market corruption, then we should focus on the corruption instead of inventing some other rationale.
Cheerio
GT
GT's Market Rant
GT, there's a lot to reply to in your comment, but I don't have much time right now...
I haven't mentioned long-term instability. The time period for which the system remains unstable will depend heavily on what the rational market participants do after they see HFT making the market exceedingly volatile and irrational. If they decide to jump in and take an opposite position, the markets may stabilise. 'May' because that will depend on what others decide to do.
As for market price being anchored (weakly) to economic performance, pray tell, how would you justify the Dow above 9k? If you're going to say the linkage is long term, that leaves HFT free to move markets and make them unstable in the short term.
Agree with that completely - which is why prices won't go to infinity or to zero. An unstable system need not go to infinity or zero IF the input (orders) changes to favour a move in the opposite direction. So if the bulls and the HFTs are pusing the system to infinity and a whole lot of bears jump in, the HFTs will, switch sides sensing the bigger profit opportunity and the system will violently move in the opposite direction.
The greater the market's movement in any direction away from what most participants consider rational price, the greater the opportunity to profit from bringing it back ... at some point of time, the volume and differential (market price - limit price) of rational investors *should* become greater than that of the irrational ones, causing HFTs to jump ship.
Having seen what has happened over the past 6 months, I must laugh and ask if you're joking (that's my job).
First, my assertion is not a solution, it is an analysis and a scenario. Second, I have accounted for human motivations (as parts of my comment above will testify). Which is why I've said the system will become unstable - I did not say the system will fail by approaching infinity or zero.
Now you're the one ignoring human motivations, as well as the possibility that human sentiments can be manipulated to turn a group of rational individuals into a frothing-at-the-mouth mob.
More later ... Thanks for the comment - made me think :)
I enjoy your comments, but this rational investor is finding it hard to remain short a market that goes up 12 days in a row, with almost as large a percentage gain.
In fact, what happens when the rational investor makes his bet, and gets flushed out, due to irrational market behavior? The closing end of the rational investors trade only serves to push the market into further irrational territory.
Cogent comment- but re "If HFT caused the price of the contract to diverge wildly from the range of price expectations, rational investors would bet in the opposite direction"
What happens when the same HFT initiative that established the distortion/divergence from expectation - reiterates with the same dynamic, albeit with minor revisions, (as price attempts to correct and intersect with 'expectation') and results in a false 'ECM signal' in your parlance to the participants looking for that retrace back to 'norm'. In short what happens if the objective ,volume and weight of the rationale investor is offset by a negative feedback/ ECM event due to lighter/contrarian volumes, less confidence in EMT, less capital? If the HFT does receive 'positive feedback; and can perpetuate in a market with less confidence in EMT (primarily due to non-free market interventions) thereby producing a skew in 'expectation', you will find new parameters of 'expectation' created. A new 'average' that encourages a divergence not from dynamic 'expectations but from the systemic premises on which the initial 'expectation' was founded.
As such HFT in the current climate could, shift expectation curves and invalidate rationl moves especially if the 'positive feedback' engine determines and can build an empirical model that allows it to adapt to the attempt to retrace to 'norm'; AND furthermore learns how to bully that contrarian liquidity. This effect today could and most likely would be amplified by the zero cost capital that the big players have at their disposal.
Would be good to get your thoughts on the above.
An unstable system fails. The market is not an unstable system. I don't see any logic in this post.
The final paragraph further illustrates HFT's profitability to the remaining few who dispute it.
The final paragraph also is the final nail in the coffin for those who diminish HFT's profitability. I believe they were wrong to begin with.
Your last paragraph speaks volumes to something I thought about last year, in the run up of commodity prices. Who better to push prices higher and place a large order with a contract price substantially higher than the market price than a producer of, lets say, crude. The scariest thing about commodity speculation is physical delivery. Who better to not care than someone producing crude. Just a thought.