Latency arbitrageurs do not provide the value you claim they provide.
They consume liquidity by identifying that one individual is willing to buy at $10.02 at point A and one who is willing to sell at $10.00 at point B. These individuals would discover each other naturally in (literally) the blink of an eye; but HFTs pay to colo everywhere, they pay for 40Gb connects and ASICs. They pay for the fastest possible connections between those colos.
This means that instead of those individuals who truly create liquidity and who truly drive the market finding each other; the HFTs are able to wedge themselves into the middle of the transactions. This works because the NBBO system is slower than their systems. It works because of complex order types that benefit only HFTs (no actual investor requires a hide not slide... that's just a tool for HFTs to cut the line).
HFT does not create liquidity. It does not even out price differences. It is an entirely predatory tool to extract value that was generated by other, better men.
HFT is a place where self-righteous nerds pick everyone's pockets.
HFT is useless trash.
The only place I agree with you is that HFT-based theft, like car radio theft, is a relatively minor crime and one that is declining over time.
True market making is often algorithmic and automated, and it operates quickly. But it is completely different from the nonsense that is HFT.
They consume liquidity by identifying that one individual is willing to buy at $10.02 at point A and one who is willing to sell at $10.00 at point B. These individuals would discover each other naturally in (literally) the blink of an eye; but HFTs pay to colo everywhere, they pay for 40Gb connects and ASICs. They pay for the fastest possible connections between those colos.
This means that instead of those individuals who truly create liquidity and who truly drive the market finding each other; the HFTs are able to wedge themselves into the middle of the transactions. This works because the NBBO system is slower than their systems. It works because of complex order types that benefit only HFTs (no actual investor requires a hide not slide... that's just a tool for HFTs to cut the line).
HFT does not create liquidity. It does not even out price differences. It is an entirely predatory tool to extract value that was generated by other, better men.
HFT is a place where self-righteous nerds pick everyone's pockets.
HFT is useless trash.
The only place I agree with you is that HFT-based theft, like car radio theft, is a relatively minor crime and one that is declining over time.
True market making is often algorithmic and automated, and it operates quickly. But it is completely different from the nonsense that is HFT.