Not a day passes without some HFT company being charged (and slapped on the wrist) for rigging this market or that, or without some lie about the "benefits" of High Frequency Trading being blown to oblivion. Of these lies, none is of course bigger than "HFT's provide liquidity." But even that may be about to end. Enter the European Union, which is investigating "whether high frequency traders provide liquidity that benefits financial markets as a whole."
Presenting Fake Liquidity, which is truly the best way of describing what the algos of Citadel, Virtu, GETCO and other market manipulative players do.
From Bloomberg [11]:
The EU’s financial watchdog, the European Securities and Markets Authority, will look at whether automated trading adds fake, or ghost, liquidity to markets, said Steven Maijoor, the regulator’s chairman.
“There has been a suggestion that the liquidity they are providing is not real liquidity because once you would like to go into the trade and accept an order the offer disappears,” Maijoor said in an interview in Hong Kong on Jan. 20. “We are looking now into the specific issue of what is called ghost liquidity.”
Hmmm: we wonder who could have possibly said that first some 6 years ago, when anyone daring to say that was branded - what else - a crazy conspiracy theorist?
The study by ESMA’s economics unit adds to a global research effort into the effect that computerized trading is having on markets. HFT firms have used their powerful computers and super-fast networks to make themselves the main providers of liquidity in many markets around the world.
“There is a heightened supervising attention,” Maijoor said. “We should have proper rules in place for high frequency trading. But at the same time, we don’t think it is a priority or something that should be banned or that should be stopped.”
Then again, when we said "it is about to end" we assumed a fair, unrigged regulatory system. Alas, in today's world, where HFTs are a critical cog of the market manipulation scheme (just ask the NY Fed whose PPT interventions would be impossible without that HFT titan Citadel), and whose lobby has nearly endless influence over the crony and corrupt farce that is the SEC, sadly HFTs will continue to dominate and rig stocks at least until the next mega crash wipes out the fake "bull market" of the past six years.
Then, and only then, will everything be blamed on HFTs.
Until then, enjoy your rigged "made for muppets", and suffused with fake liquidity markets.
