tag:blogger.com,1999:blog-7905515.post176413513701203569..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Investors Like Large Spreads, Says BrokerEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7905515.post-39169230736322290422012-06-25T09:38:51.118-05:002012-06-25T09:38:51.118-05:00Oops, my bad. That didn’t come out right. Greate...Oops, my bad. That didn’t come out right. Greater *commissions/transaction costs* would obviously hamper HFT to a much greater extent than it would infrequent retail or other traders but in a marketplace that is characterized by computer dominance, de-centralization, narrow spreads and low commissions, HFT certainly thrives. New problems (and benefits) exist today that didn’t exist before and it’s not so easy to isolate the culprit. But there is some evidence to suggest that when spreads were wider, there was more “sticky” liquidity on the books at various levels: 20k @ 1/8, 40k @ 3/16, 30k@ ¼ etc. Now, it’s often harder to see at what levels that liquidity resides or if it will actually be there when you reach for it. So, instead of chunks of shares at 1/16 increments or whatever, there tends to be much small amounts of shares at penny levels. During periods of market stress that perceived liquidity also tends to vanish all of the sudden, causing these mini-flash crashes…which investors don’t like.Mercurynoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-35506042920691462612012-06-24T14:28:57.903-05:002012-06-24T14:28:57.903-05:00"bad-ask spread"
Was this intentional?
..."bad-ask spread"<br /><br />Was this intentional?<br /><br />One would think higher spreads would be positive for some HFTArmfloaties Noseplugnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-50209975420550931502012-06-22T16:23:23.821-05:002012-06-22T16:23:23.821-05:00I'm not sure HFT benefit more from lower sprea...I'm not sure HFT benefit more from lower spreads...most high speed transactions are about providing liquidity, capturing spread edge from lazy, uninformed retail traders crossing the spread.Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-44815214097143820132012-06-22T09:00:35.179-05:002012-06-22T09:00:35.179-05:00As if brokers will refuse a ticket in XYZ stock as...As if brokers will refuse a ticket in XYZ stock as payback for research in ABC stock. In any case most big funds these days pay brokers out of a total commission pool based on in-house votes and traders place orders independent of research considerations.<br /><br />But a wider minimum spread would hamper HFT strategies so there’s that self-interest to consider too ;)Mercurynoreply@blogger.com