Fidessa's Steve Grob responds to CME chairman emeritus Leo Melamed's defence of HFT.
Interesting to read the venerable Leo
Melamed’s open letter in the FT this
week on HFT and regulators. The CME’s chairman
emeritus certainly makes a good point when he says that trying
to stifle innovation is both wrong and inevitably doomed to
failure, but I am not sure he’s completely right
in a couple of areas.
First, whilst it’s true that algorithmic or HFT
players have indeed had the effect of narrowing spreads, this
is not always the best thing for the trading community as
tighter spreads are nearly always associated with smaller trade
sizes. This is a particular problem for the institutional
buy-sides wishing to trade in size. A colleague at one such
buy-side firm compared HFT to a waiter who, rather than serve a
meal in three sensible courses, insists on bringing it to you
in small spoonfuls and stays at your table waiting for a tip
before he will go back to the kitchen for your next
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