Nanex ~ 15-Feb-2013 ~ The HFT Scotty Dog
High Frequency Trading (HFT) does not narrow spreads, except in maybe the top 50 stocks,
and then only when it is to their benefit. For the other 7,950 traded NMS stocks, quotes
bear practically no relationship to trading activity or economics. Anyone who says otherwise,
has either never looked at the data, or is telling you a story.
See this page for more on that.
One thing of value in HFT "price discovery", is that it sometimes produces beautiful
images. Try not to think about the blatant, illegal price manipulation.
1. VIIZ Showing the best bids and asks color coded by exchange and NBBO (gray shading)
over 1 second of time. There were no trades.
Each triangle effectively represents a buy or sell order that replaces (cancels) a previous
order. This is just one second of time.
2. DLPH Showing 12,165 bids and asks color coded by exchange and NBBO (gray
shading) over 1 second of time. No trades occurred.
The gray shaded bar is the NBBO spread (the highest bid and lowest offer from all exchanges).
Manipulation? Absolutely, but we're here for the asthetics.
3. DRV Showing 72,469 bids and asks color coded by exchange and NBBO (gray shading).
There were just 4 trades during this time.
It is impossible to accept that regulators see this data. Otherwise they would act,
and there would be fines. Because it's that blatant, in your face manipulation. And