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by tantalor
5179 days ago
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Can you unpack that statement? Is it not true that HFT generally increases market liquidity and decreases volatility? That is, excepting glitches, e.g., the flash crash. I was actually going to say that, were the HFT algorithms to be released, more firms would participate, and innovation would flourish, which would magnify the positive (or negative) effects of HFT. That's not to say that Goldman should not be allowed to protect its secrets, but the wording of the espionage laws seem to focus on the potential negative effects of espionage on the economy. |
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That's the conventional wisdom, but it isn't at all clear that there is actually evidence to support it.
eg:
A majority of British asset managers, pension funds and corporate treasurers polled in a UK government-sponsored study are sceptical that “high-frequency” trading provides liquidity to markets.
http://www.ft.com/cms/s/0/c3dce154-6301-11e1-9245-00144feabd...
Taken together, this evidence suggests something important. Far from solving the liquidity problem in situations of stress, HFT firms appear to have added to it. And far from mitigating market stress, HFT appears to have amplified it.
http://marginalrevolution.com/marginalrevolution/2011/10/mor...
Personally, I like the idea HFT - but it isn't at all clear it is actually beneficial.
(Edit: I can't understand why anyone would downvote you for that question. It seemed reasonable to me...)