High-Frequency Trading Is Bad For Profits, Including Those Of High-Speed Traders: Study

Mark Gongloff is a lot less funny since he went crypto-fascist and started accepting Koch brothers funding.
From the Huffington Post:

High-frequency trading is bad for everybody, including high-frequency traders, according to new research from a university that produces economic reports that are sold early to high-frequency traders.

Congratulations, world, these are your modern financial markets. The study, by the University of Michigan's engineering department, focuses on one particular tactic of high-speed trading, known as "latency arbitrage."

This is the practice of gaming the split-second lags between the time trades are made and the time those trades are crunched by a central clearing house called the Security Information Processor into a price quote called the National Best Bid And Offer. Traders with super-fast computers can calculate the NBBO faster than the Security Information Processor can do it, and they take advantage of the tiny gaps between the old NBBO and the new NBBO.

The researchers say this trade somehow reduces the total amount of profits in the system -- in other words, it not only hurts regular, slowpoke investors, but also other high-speed traders. Whatever profit each individual robot makes on a latency arbitrage trade is less than the amount of profit that is destroyed by the practice, according to the report. This is just more evidence that zapping thousands of trades per second does nothing for society.

High-speed trading's defenders, including academics whose research is bankrolled by high-speed trading firms, claim that this sort of foolishness improves market function and makes trading cheaper for everybody, which gives investors more money to spend on puppies and charity and whatnot.

But the University of Michigan researchers, who were paid by grants from the National Science Foundation, say the latency arbitrage trading they studied actually hurts market efficiency by widening the spread between the prices that buyers will pay and the prices that sellers will accept....MORE

Just kidding about the Koch Bros/crypto-Mussolini thing, I think Mark is actually an anarcho-capitalist and has an endowed chair, or seat or...
See also:
The Costs and Benefits of High Frequency Trading: A Profoundly Deep Dive
"High-Frequency Trading: Not as Profitable as You Think"
 Morgan Stanley on High Frequency Trading and the Inevitable Destruction of the Equity Market (futures too)