Paul Wilmott has an excellent blog post out on how, among other things,  HFT has distorted the price/value relationship.  Here are some excerpts: “I am concerned about High-frequency Trading (HFT) for two main reasons: Reduction of the relationship between value and price; Potential for positive feedback….Positive feedback is when an up begets a buy, which causes the stock to rise again, causing another buy, etc. etc. And when a fall begets a sell, causing another fall, and further selling, and…” “Whenever you have a bandwagon, such as HFT now is, then you have the potential for systemic risk and feedback. (more…)

Here we are on a slow late June morning and we wake up to find this piece of rubbish in our inbox.  A little background first: On May 11th, Themis Trading published a paper about information leakage on certain data feeds.  The paper focused on US exchanges but made its way to Europe.  European investors acted swiftly and demanded  that certain exchanges in Europe remove some order id numbers that may be disadvantaging their orders.  BATS and Chi-X bear the brunt of this action as European investors shift their order flow to Turquoise (Turquoise is 51% owned by the LSE (more…)