I get that arbitrage helps set the price, but what does HFT do, beyond deciding which of the competing nano-second enabled traders get to edge a profit in an artifact of how information flows?
I don't see this HFT as being information-worthy arbitrage. I have an intent to set a real-world price, I declare it, and in the increment of time it takes my packets to flow, somebody edges in the queue and inserts trades to make me have to deal with them for some increment of price. I wind up paying more, and the original source winds up getting less, or some other event.
its like re-intermediation, in a world heading to dis-intermediation.
What is the real-world, wider economic "good" here? If my pension fund is routinely profiting from this, I am not sure that is a wider good btw: We could probably make more money selling Heroin, if we're going down this 'whatever it takes' track...
> it takes my packets to flow, somebody edges in the queue and inserts trades to make me have to deal with them for some increment of price
This is the biggest mistake people make when talking about HFT. At no point in time does someone see your order before it hits the exchange (unless you’ve specifically agreed to trade that way & even then they are obligated by lots of regulation to execute in particular ways to protect from that agency problem).
No HFT is taking pennies from your order. If you send a limit order through the book you will get filled at the best price available up to your limit.
Thanks for explaining. If they're just squeezing margin by being quicker, and not intruding into my trade (I don't trade. this is clear I think, given how ignorant I am) then I have less to worry about.
I don't see this HFT as being information-worthy arbitrage. I have an intent to set a real-world price, I declare it, and in the increment of time it takes my packets to flow, somebody edges in the queue and inserts trades to make me have to deal with them for some increment of price. I wind up paying more, and the original source winds up getting less, or some other event.
its like re-intermediation, in a world heading to dis-intermediation.
What is the real-world, wider economic "good" here? If my pension fund is routinely profiting from this, I am not sure that is a wider good btw: We could probably make more money selling Heroin, if we're going down this 'whatever it takes' track...