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There is an article on C16 of today’s WSJ: Small-Caps Are Missing Out On High-Frequency Trading Benefits(http://online.wsj.com/article/SB125306075442314147.html?mod=googlenews_wsj). It is a well written article that laments that the liquidity HFT provides in large caps is absent in small caps, because HFT players don’t play there.
While we would agree that the large cap space is in fact a playground for at least one style of HFT (rebate-driven), and that liquidity is added by HFT in the top 100 large cap stocks, and spreads are tightened as a result in the top 100 large cap stocks, we agree with the NYSE study
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September 18th, 2009 at 2:36 am
I won’t even bother to read the WSJ article, as anyone who watches the tape knows that what you describe is actually what happens every day.
Even worse in micro cap and low volume names. A buyer (or seller) who is detected is going to pay dearly before the order is done.
There is always some risk for the HFT frontrunner, but not so much in this grinding higher market.