Our criticism below is really not personal. We swear. It is just aimed at an argument we are so accustomed to hearing. And we fear that as folks hear something often enough, then they start to believe it. Sometimes you actually have to slow the argument down to hear how ludicrous it really sounds.

Here is the video: http://video.ft.com/v/89974674001/Jun-4-Speed-doesn-t-kill-

Larry Tabb:

“Speed is good.  Speed reduces risk. If I can’t get orders into the market as fast as I want, and I can’t get orders out of the market as fast as I want, then I need to quote wider as a liquidity provider, because to a certain extent, if my orders are in there for longer than I want them to be in there, then there is a chance I am going to get hit, when I don’t want to get hit.”

1) What?

2) So you need to be able to pull your bids that folks see, and think that they can access, before they can actually access them? Does that sound, ummm, disingenuous? Or does it sound like  Fleeting Liquidity and not Real Liquidity?

3) You are saying that you need to pull the liquidity that you provide before you actually provide it? Ahhh . Crystal Clear.

4) SEC are you listening? This is the problem with the whole “Liquidity Provider” train of thought.

We believe that the terminology needs to be called out for what it is. If you are scalping, then say scalping. But to call it this now commonly accepted term, liquidity provision, is wearing thin.

Folks they are providing liquidity when they are guaranteed a profit, or close to it, day in and day out, trade in and trade out. Ask (or subpoena) the large brokerage firms with their perfect trading days each quarter, or ask the HFT firms that make money every day for 4 years straight. Their speed allows them to yank bids when they see you coming in your ’73 Dodge Dart (The SIP). And when they are not guaranteed the profit, they disappear, like on May 6th. And those that don’t disappear turn from liquidity providers to liquidity demanders before you can say co-locate.

I think many experts, be they consultants or exchange heads, know this too. They just can’t say anything that would go against the billion dollar baby.