HFT raises pricing for retail traders by allowing front running of trades and makes the market less competitive overall for those without the infrastructure to do so. This isn’t even in question.

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loeg 21 hours ago | parent | next [-]

No, it doesn't. HFT lowers spreads for retail at the cost of slower market makers -- hedge funds. HFT isn't front-running (which is illegal).

	▲	apimade 18 hours ago \| parent [-]
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phil21 21 hours ago | parent | prev [-]

It's very much in question. As much as I hate to admit that since I do not like the concept of HFT existing as it's not providing very much value to society (imo) compared to the money made. The intellectual power behind this stuff would be much better put to use for something productive.

It likely lowers the transaction costs due to adding liquidity and narrowing bid/ask spreads for small retail orders.

But indirectly it likely raises costs for institutional investors like pension funds and large ETF managers making giant block trades on behalf their beneficiaries.

So tldr; Probably fractionally better pricing for your $5k GOOG trade, fractionally worse for your VOO holdings over the long term.

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lokar 21 hours ago | parent [-]

Does it really hurt institutional traders? How? Is it based on the idea that they can’t get the retail spreads? Because there is no world where they would have ever gotten them. A market maker would loose money doing that.

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phil21 20 hours ago | parent [-]

I'm certainly no expert whatsoever. This is just my understanding from talking with a few folks I consider quite smart who work in the space. Some working for HFT firms, some elsewhere. Also reading on the topic over the years.

There does seem to at least be some evidence that HFT firms decrease retail spreads overall. Either way, my main point being made is that negative impact to retail traders is very much in question.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2183806

	▲	lokar 20 hours ago \| parent [-]
		That seems to be about a fee change that increased costs for market makers, widening spreads.