HFT, High Frequency Trading

In Which I Interview an HFT and Ask Him Some Tough Questions: " . . . We have ~13 “lit venues” (exchanges, ATS, ECNs) and something like 60 dark pools. Yet, it’s important to have a unified “best bid / offer” so that investors who are forced, because of choices their broker might make, to deal with just some subset of these 70+ venues aren’t being screwed by bad prices. There are lots of related issues, including what to do, if anything, about dark pools, and how to reduce the latency embedded in the NBBO (national best bid / offer). Also related is the issue of funky order types, against which Haim Bodek has become a very vocal opponent. His concerns aren’t unjustified. But most of these problems would be obviated with a minimally-latent NBBO and/or an end on the ban on locked markets. These issues can get pretty technical, but they do have some far-reaching implications. . . ."

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