And so it begins. The HFT crowd has launched their defense. As we all know, the HFT crowd is a secretive bunch so their defense is being launched though various surrogates who have their own self interest at hand. First, there are the brokers. We have seen many of these “client” letters from brokers over the past week and they all seem to have the same theme: The HFT attack was launched by self interested market participants and it is filled with erroneous statements and misinformation. They all also now seem to be against “flash orders”.
We wonder where these brokers were before the HFT controversy started? Why didn’t we hear their voices complaining about the disadvantages of the flash orders last month? Were they protecting their clients before the issue was exposed? Their silence was deafening.
Second, there are the exchanges/ecn’s. Their defense is even weaker: “we knew these flash orders were bad for the market and disadvantaged a major part of the market but we had to implement them because our competitor was and we were losing market share.” Well, that makes us feel better. The market centers that we all trust to maintain fair and orderly markets are reacting to competitors and implementing things that they know are unfair. This begs the question: what else are they doing to maintain their competitive position at the expense of the average investor?
Finally, there are the research/consultant firms. Their argument can be pretty much summed up as: “what are you going to do, go back to the telephone”. So, rather than question the established practices, they imply that we need to just accept the fact that technology is always good for all investors. They also like to point out that the old “specialist” system was filled with problems and “special” advantages similar to the “flash” order. So, what’s the big deal about “flash”? We think that having an “unfair” precedent is not a good argument for a current unfair order type.
Let us be clear: This HFT debate is not about our firm, Themis Trading. Our number one and only goal is to help our clients achieve best execution. We are comfortable with how we helped shine a light on a topic that other larger market participants are only now choosing to speak up about. The question we have now is: What took you so long?