Nanex Research

Nanex ~ 20-Feb-2014 ~ The Value of an HFT Quote

The Market Value of an HFT Quote Continues to Plummet

It's taking more quotes to get the same amount of trading done in today's stock market, meaning that everyone has to process more information than ever before, yet actual trading continues to stagnate. High Frequency Trading (HFT) algorithms that place and cancel quotes faster than most people can physically process them, are causing market data inefficiencies to soar. Here is how HFT harms everyone, including long term investors (well, except for HFT CEO's and the Exchanges).

Data is for SPY between January 2005 through February 19, 2014.

The number of quotes each day in SPY is skyrocketing..

..but the total dollar value of SPY traded each day stagnates..

..exposing the gross inefficiency of HFT Quotes.

This is how many quotes it took to trade $100,000 worth of SPY each day. Higher values means less efficiency (bad). Reg NMS, and the birth of HFT began in 2007.
Nanex Research