"Induce" may not have been the best word; I didn't mean to imply that manipulation of the sort you describe was going on.
What I meant was that the whole point of HFT is to get information about the market state, and act on it, a little bit faster than others; which means that when you make a bona fide offer based on your HFT algorithm's understanding of the market state, that understanding is based on information that the other party to the trade does not have, which means that the other party might accept a trade that, if they had the same information as you do, they would not accept. That is asymmetric information. There doesn't have to be any skulduggery going on; it's a natural consequence of what HFT algorithms are designed to do.
why should it be curtailed?
I'm not saying it should be curtailed; I'm saying that it's a shame that so much talent and effort goes into a zero-sum activity, and that that fact is a big part of why ordinary people distrust the financial system. In other words, HFT is giving other more beneficial financial activities a bad name. The right way to change that is for the financial system to police itself.
I think that is a dangerous standard to enforce anywhere.
I agree, and that's why I think the financial system needs to police itself, before it gets policed by others who don't agree with you and me that such a standard is dangerous to enforce.
"Induce" may not have been the best word; I didn't mean to imply that manipulation of the sort you describe was going on.
What I meant was that the whole point of HFT is to get information about the market state, and act on it, a little bit faster than others; which means that when you make a bona fide offer based on your HFT algorithm's understanding of the market state, that understanding is based on information that the other party to the trade does not have, which means that the other party might accept a trade that, if they had the same information as you do, they would not accept. That is asymmetric information. There doesn't have to be any skulduggery going on; it's a natural consequence of what HFT algorithms are designed to do.
why should it be curtailed?
I'm not saying it should be curtailed; I'm saying that it's a shame that so much talent and effort goes into a zero-sum activity, and that that fact is a big part of why ordinary people distrust the financial system. In other words, HFT is giving other more beneficial financial activities a bad name. The right way to change that is for the financial system to police itself.
I think that is a dangerous standard to enforce anywhere.
I agree, and that's why I think the financial system needs to police itself, before it gets policed by others who don't agree with you and me that such a standard is dangerous to enforce.