GLHF!
Traders’ quest for the slimmest sliver of advantage is as old as markets. In the 19th century, Reuters used carrier pigeons to speed the delivery of stock prices. More recently, Chicago pit traders donned platform shoes so they could see and be seen better on crowded trading floors. Today, getting an edge is all about the speed of light: 186,282 miles per second.
– Bloomberg Businessweek
I’d recommend buying Flash Boys by Michael Lewis instead. Investing in yourself is the best investment noone can take from you, even the front-running HFT shops - they are faster then thou by seconds, they want to be faster than their competitors by milliseconds. Even if your trades are done via FT which uses IEX (the exchange set up by the main guy from Flash Boys). HFT algo funds make money when shares go up and down and volatility is on their side. They make money by preying on our orders, even if the client is a huge asset manager. The can go home at the end of the day and sleep well not worrying about their positions - because they may not have any before trading closes.
“Market-taking, not market-making”
(Source)
Another thesis:
“However, some high-frequency traders are leveraging the technological and informational advantages created by a two-tiered marketplace to prey on other investors. These high-frequency traders are paying for expensive services like colocation and direct data feeds that give them an information and speed advantage that can be used to front-run the trades of institutional investors. This informational asymmetry has resulted in a two-tiered system in which the privileged class is receiving market information before everyone else. High- frequency traders are using this premier access to information to prey on institutional investors. By jumping in front of these orders, high- frequency traders enact a pseudo-tax on other investors without providing any benefit in return.”
Source - https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1291&context=dltr
No market is immune to tech and, unlike our brains, tech can scale well.
Also, watch this movie about HFTs with some Hollywood actors. Building a direct straight cable to be closer to the exchange to gain milliseconds used to a thing:
Now they go wireless.
