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"The Lie Of "High Frequency Trading" Liquidity


This is really well explained and worth your time reading the whole article.


The Lie Of "High Frequency Trading" Liquidity

"..........Let's postulate two HFT computers passing 1,000 share orders for the mythical Frobozz (FBOZ) back and forth between each other.  There's a scadload of volume generated by these transactions, and an outside observer, who is unaware that the 1 million shares are in fact 1,000 transactions of the same 1,000 shares being passed back and forth between the same two guys, might assume that there's a lot of liquidity that has been added.

But this is in fact misleading, as the following example will demonstrate. .....


Entry #1,350


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