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by er35826
4460 days ago
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The problem is not the HFT firms buying stock cheaply and reselling it for a profit. As the article points out the problem is investors placing a buy order, and the HFT firms seeing this buy order and snapping up the remaining stocks before the original buy order is fully completed. This has the negative side effect of essentially making it impossible to buy for the listed price, even when there are supposedly enough shares available for purchase at that price. As I pointed out in another comment, it's not just buying low and selling high; it's like Walmart interrupting a customer to jack up the prices on a purchase in the middle of that purchse, precisely because that customer is buying that specific item. |
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Say you decide you want to buy up a bunch of property that's all on one street, and the market price for each property is listed at $100,000. Once word gets out that you made the first purchase for $100k, the prices on those other properties are going to go up, because if there's a buy at $100k, they might as well start negotiating at $110k, but they have no idea if there's a buyer who wants just one property, or all of them.
Now, only the buyer know how much he wants to buy. If he was smart, he'd go to each seller and execute at the exact same time so when word gets out of a purchase and prices go up, he's already purchased everything he wanted, the uptick in market prices actually benefits him.
It's the same thing with trading. If the guy is buying a couple thousand shares scattered across a dozen exchanges, he absolutely needs to make sure they get posted to the exchange at the same time, or he needs to break them up in small orders over a period of time so he doesn't affect the market with his purchases.