There is no reason why shares should be bought on sold in time frames far too short for anything to have meaningfully changed about the companies or market conditions.
This is the free market speaking. If there was one exchange there would be ~no~ less latency arbitrage. But there are many... Which creates a competitive landscape and reduces fees for investors. The by product is you have many HFTs that come in to take advantage of mispricings, even if they are on sub millisecond scales. It doesn't harm the company or the investor. Its quite the opposite... Investors benefit from competition amongst exchanges and HFTs.
In addition you have redundancy in the markets system. Exchanges are important for national security... Having everything centralized would risk people's retirements, savings, and more
One other aspect of HFT that is good for the general investor is that HFT injects liquidity, making it easier for a general investor to liquidate their position, which is a desirable thing for human traders. HFT does not magically make human investors engage in more or less speculative behavior.
HFT is an easy thing to attack, but I've never encountered a lucid argument for why it's bad. "It's not fair that I'm not as fast" isn't really a reason unless you explain why removing liquidity (i.e., making it harder for you to find a buyer at your price point), paired with you moving up the "trading swiftness" rankings, is preferable.
the common argument against it is that it guarantees a technological arms race and by those conditions pushes the smaller groups out of the competition.
it's unfair in the same vein that the rich are always offered better loan rates than the poor. Yeah, it's obvious why that would be, but it's not fair either.
although imo pushing small-backer arbitrage out of the equation is a good thing.
What HFT arbitrage does is rapidly push markets with different prices into alignment with each other. If you banned HFT but kept multiple markets, the inevitable result would be markets with bigger differences in prices for longer.
The only kind of trading that really good HFT trading pushes out is other slower less efficient arbitrage traders, but why should we want more worse arbitrage traders if the result is markets being more out of sync?
What's important economically is that traders that trade based on fundamentals can do so efficiently across multiple markets. Efficient HFT arbitrage trading helps that, it doesn't hinder it.
> the common argument against it is that it guarantees a technological arms race and by those conditions pushes the smaller groups out of the competition.
But a cursory examination of history would reveal that the literal opposite has happened.
The issue isn't that there's a lot of change coming from inside the markets, it's that there's a lot of change coming from outside the market, and it's all interconnected.
The behavior of other participants is itself a first-class signal.
Rule 611 compresses that signal. By forcing everything to orbit a size-agnostic NBBO, it collapses a lot of the “behavioral bandwidth” (depth, imbalance, sweep patterns, replenishment, cancel/replace cadence) into a single top-of-book tick. Less resolution, less information.
High-resolution flow tells you who wants what, at what size, and how urgently. When we gate execution through protected quotes, we encourage tactics that flick the top-of-book with tiny size and discourage truthful size revelation. That’s signal destruction dressed up as protection.
Letting informed counterparties print away from the protected price (to reflect size or information) increases informational content. You get cleaner read-through from actual willingness to trade, instead of a compliance-driven dance around a fragile benchmark.
So yes: other people’s actions are the best data feed. The more of that behavior we can see—in size, time, and venue—the better our discovery gets. 611 reduces that visibility by design.
If HFT was genuinely good for the entire market than absolute latency would be what matters but it is only relative latency between HFT firms that matter because they are all competing against each other using the same tactics where whoever is fastest wins.
It's pretty funny that there are people in this thread pretending like "price discovery" is a real thing that happens in markets based on information. We've all seen Dogecoin and BBBYQ. The emperor has no clothes.
When I press the buy and sell button, I want the transaction to happen as quickly as possible. So does everyone else.
My millionth of a second is different than yours, and everyone else’s.
It is no different than buying or selling anything else. And there is no loss from the additional liquidity, you can easily set a limit at which you want to buy or sell.
> not me. I don't mind if it takes like 20 seconds or so
Which is fine! You can probably find a broker who will give you fee-free trading with that preference. The price you execute at won’t be as good. But unless you’re trading millions, that’s probably fine.
Do you only want us to get our news once daily via a physically printed and distributed newspaper? That’s the timeframe that we used to use for news updates. If not (I.e., you’re in favor of keeping the Internet), how would you reconcile the asymmetry between trading and news updates? If there is a disparity between these timescales, you end up with markets gapping hugely every time they open. This just increases risk and volatility. Yes, markets do this overnight today, but 24-hour markets don’t do this as much and they allow a trader to set stop orders that are active overnight to protect positions. So, for instance, futures markets will gap over a weekend break, but because they trade 23 hours per day during the week, they are much more smooth than they would otherwise be. Compare gaps in ES SPX futures contracts vs. gaps in the SPX itself, for instance. In general, smoother is better for everyone.
Humans do still manually trade. The existence of HFTs doesn't prevent or interfere with that, in fact it makes it easier by ensuring that prices are more likely to be converged to a consensus market price at any given millisecond.
Thinks of it like this. When I put in a trade at human speeds based on business fundamentals, I'm not looking that the millisecond by millisecond prices, I just put in a price I am willing to accept and if the market reaches that price I get execution. HFT makes that easier and more efficient across markets by ensuring prices are converged rapidly.
How do you think it makes it harder or worse? If I put in an order to buy at $x on a particular market because I think the stock is worth more than that for business reasons, what is it about the existence of HFT that is a problem for me?
Disagree? You think milliseconds is “better” somehow?
Then by that logic microseconds are better still! (A straight-faced argument made by thousands of HFT people.)
Then, surely, nanoseconds matter. Again, some traders care deeply about shaving single digit “nanos” off their response times by using smart NICs that can respond before the incoming packet has even finished arriving! Bypassing the CPU entirely because ermahgerd that would waste precious nanos!
Okay, what about femtoseconds? Attoseconds? Low single digit Plank time units?
Clearly the extrapolation is nonsense.
The problem is that there’s always an advantage to some rent-seeker to be faster than everyone else, so there will never be consensus between them and the general public. Or each other.
It’s a classic tragedy of the commons.
This is why laws are required, to prevent that one greedy guy putting “just one more cow” onto the pasture than the other greedy guys.
This is the “speculation is bad” take with a side of naïveté about how markets work.
Open an order book. Prices and quantities aren’t decoration; they’re live telemetry for supply, demand, and how tight the crowd’s consensus is at each level. That’s information, full stop.
A human (or machine) trader forms a view of fair value against that tape. The book helps decide how to trade—size, urgency, venue—regardless of motive: arbitrage, hedge, speculation, investment, cash-out. Intent doesn’t change the math.
Prints are messages. Every execution updates everyone else’s priors. More prints → more information → smoother discovery.
Make the book sparse—only a handful of trades per day—and watch confidence collapse. With weaker consensus and wider error bars, people step back. Liquidity thins, friction rises. That’s not morality; that’s microstructure.
Time horizon doesn’t invalidate the signal. A strategy that unfolds over days and one that resolves in milliseconds both add to the dataset. If it trades, it teaches. More resolution in others’ behavior means better prices and deeper books. That’s the game.
Millisecond trading strategies have zero relationship to information about companies or economic fundamentals and are therfore not economically productive. They're exploiting microstructure inefficiencies like latency arbitrage, order front-running, not price discovery. That's not 'teaching' the market it's a tax on everyone else's execution. The fact that it's legal doesn't make it structurally useful. It is just a result of the rules not being updated when trading became automated at superhuman speeds
> Millisecond trading strategies have zero relationship to information about companies or economic fundamentals and are therfore not economically productive
It is not clear to me that the only economically productive information is "information about companies or economic fundamentals."
If I know some idiot is willing to pay 100x what a company is actually worth, that is economically productive because it gives me, someone better with money, a ton of resources that formerly were controlled by someone who didn't know how to leverage the assets in an economically productive manner. IT's the same argument as allowing adverse possession: transfer of assets from non-productive owners to productive owners, benefiting society as a whole.
With this, I've established a third kind of data beyond "economic fundamentals" and "information about companies."
Right. “Worth” and “price” are relative notions that are only useful when paired with a point of view. What’s your house “worth?” You might have a number in your head, but unless you have a buyer willing to transact at that price, your house isn’t worth what you think it is. And this relates to economically productive information. Your house might also be worth more if one knows that there is gold or oil buried underneath. It might make more economic sense to bulldoze the house and start mining or drilling.
The boundary is "arbitrary", but clearly there has to be one, otherwise we're all nodding in agreement as trading speed heads inexorably towards Plank time units.
We have some convenient "lines in the sand" that we can use as a guide:
- To make trading fair globally, the round-trip time for light around the planet could be multiplied a couple of times. That's about a second.
- The fastest possible time a human can parse the meaning of a long headline (not the full news article!) is... about a second.
- Nobody in their right mind should be buying any significant volume of shares without double-checking their order. There's no way to do this even vaguely carefully in under... a second.
Etc...
Bots trading faster than a second are trading with each other, and the only signals they have are each other.
Humans are what markets are for, not bots.
This reminds me of a story from WWII where a bunch of generals took a holiday at the same time, leaving a junior general in charge. He was in a bit of a panic because he was expecting to be overloaded with work... but found it easy. The generals were making work for each other by requesting reports, organising meetings with each other, etc...
Bots make work for bots, they generate signals for bots ever faster, to be processed by faster bots still, etc...
It's just... nonsense. Zero real information is being generated, they're just "riffing" off of the much less frequent human-initiated trades, all of which take minutes to organise and execute with due diligence.
It's like being asked to write a 10-page essay on a three-line poem.
The only non-arbitrary boundary is the one set by physics. Everything else is arbitrary. There are ways to greatly reduce front-running of orders, but that actually is an orthogonal issue to HFT and microstructure level trading.
hah someone finally said it. The financial market or whatever the f it's called has become a Monty Python sketch. Like those "pro" StarCraft gamers that keep randomly clicking their mouse for no reason except to keep their APM counter high.
It's exhausting to see good reasons offered and then y'all proudly failing to understand those reasons. Like, there are literally multiple comments here explaining it.
If I have a condition that is resolved by standing upside down on my head, and I invent a 100 ways to balance my body on my head and explain the reasons for each of them, it doesn't mean that standing on my head is a good or sensible thing to do. And none of them address the core problem that is the condition that requires me to stand on my head.
Look at why shares and the stock market were created in the place, and how many layers we laid on top of them and made the means the end and the purpose. If it takes you more than 2-3 sentences to explain something that's purely invented by humans it was probably silly to begin with.
Like the other day I was just watching a video about UTF-8. It spent a good chunk explaining all its various quirks and rules and workaround that all went back to how ASCII was dumb in some of its choices in the first place and now we're stuck with that forever.
heh I thought of that while writing the comment, but I think I covered it with "something that's purely invented by humans" which finance definitely is, unlike medicine, surgery, physics, and to a lesser degree, computing.
Except for the fact that people don’t know what the price is even with all available knowledge. HFTs serve a pretty useful function in converging to a discovered price the market can bear continuously. Prior to HFT markets were generally less stable on their pricing and liquidity was much worse. The fact you can basically trade at any time on anything instantly is made possible by HFT.
I look at them as providing a service like an energy exchange does in ensuring power distributes evenly and regularly across a region across providers and grids. They clip a fee in the middle but they provide a service in stable supply and prices.
This doesn’t mean automation isn’t without risk, and like an energy exchange, when things go badly they can go very badly. But by and large you never notice either the HFT or the energy exchange while you benefit from their existence.
In addition you have redundancy in the markets system. Exchanges are important for national security... Having everything centralized would risk people's retirements, savings, and more