Skip to main content

View Diary: "79% of investors have no trust in the financial system." (154 comments)

Comment Preferences

  •  The money they make (4+ / 0-)
    Recommended by:
    shaharazade, EthrDemon, Nailbanger, Jim P

    with their high-speed computerized trading algorithms doesn't just magically appear. It comes out of someone's pocket. You say the market makers are giving it away for the increase in volume, but I don't buy that. Oh, I'm sure it does reduce the spread. But the way I understand it, the programs look at the bid/ask numbers and jumps in and out almost instantaneously when the numbers are right, essentially front-running all the other trades and driving the price for others up or down by small fractions. For a guy like me who doesn't really do much, that amounts to very little, but I read Goldman Sachs and others have made billions from HST. And I don't think it is the market-makers who are losing that money.  

    •  The money HST makes, once went to market makers (0+ / 0-)

      both those who officially had that role on the NYSE as well as those who did so on their own.  Simply put, they would hold an inventory of shares and sell at the ask price and buy at the bid.

      HST and other computers have largely taken away these profits from market makers and given the bulk of the money to investors in the form of lower spreads.

      The people who most hate HST are those who previously made money as a market maker.

      As I write this comment, the difference between the bid and ask price on the SPY ($146.97/share) is one penny - a spread of less than one on hundredth of 1%.  Very different than the days when the minimum spread was $.25.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Wed Jan 16, 2013 at 10:12:31 AM PST

      [ Parent ]

      •  We're talking two different things. (0+ / 0-)

        There are the high-speed computerized trading systems that have largely replaced the old-time market makers and then there are the sophisticated high-speed trading programs designed to skim money from that system.  

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site