You apparently believe in free lunches. The HFT guys are a net minus in terms of dollar flow into the market, otherwise they wouldn’t do it. Brighten up, they drive up the price I pay and drive down the price when I sell. It’s heads they win, tails I lose, that’s the whole point. Just because they only took a penny each way from everybody in the entire market doesn’t mean they aren’t stealing.
The market and all the securities within it are net priced based on money flow in versus money flow out. These guys are essentially taxing the market, without adding value. Your price stability argument is bs because the stock will be priced by demand no matter what the HFT guys do. The amount of volatility they tax can’t and won’t stop major sudden shifts, and minor shifts would not be harmful with or without HFT.
The cost of trading comes down regardless, as brokers will always look to attract investors with better pricing and the only thing HFT provides is a technology for removing a percentage of investors money from their accounts.
Go sell crazy some other place, we’re all stocked up here.
Free lunches? Not at all. They’re a part of the trading eco-system, just as long-investors are. They provide liquidity into the market just by their presence and, yes, they take a little whether money is moving in, or moving out. If anyone is looking for a free lunch, it seems it would be you. You’d like to buy or sell, and without the people in between you and the trade counter-party to be compensated for the service they provide. HFT’s make sure your trade is filled nearly instantaneously, at a price you’re apparently happy to have (else, why did you trade at all?).
In the pre-HFT days, the “tax” was 10 times worse, as “market makers” only let you buy at the ask, and sell at the bid, and they kept the spreads a mile wide. They’d pocket the difference. Until ECN’s, you couldn’t really see depth-of-market, so even small trades could move a market as some crook-in-a-suit sniffed your intention, and pulled away their bid, so you’d have to pay even more.
My point is that you should have an idea of what you’re willing to pay for your investment. It’s either a good deal at a given price, or it’s not. If it’s not, then don’t do it. No one is holding a gun to your head and forcing you to buy anything, let alone line the pockets of a HFT. But if you want to buy a stock, some broker(s), market-makers, or HFT is going to nick you a bit - same as always.
Where HFT is dangerous is that they will immediately sniff-out an imbalance, and pull all their bids and offers, and stand back while the market goes nuts. In the pre-HFT days, one of the responsibilities of the market makers was to maintain an orderly market, and they were required to maintain a 2-sided book at all times (posting both bids and offers), sometimes (though rarely) getting the short-end of the stick. There is no such requirement for HFT’s, though it’s been discussed. Today, if the market gets spooked, they can stand back and watch chaos ensue.
At the end of the day, HFT’s are doing ALMOST exactly the same thing as the suits that came before them, only the amount they take on any given trade is infinitely smaller than what it was before they were around. This is better, no?
Is it perfect? No. Do they make a ton of money? Yes. Is it better than the old model? 99.9% of the time, yes.