I mentioned in an earlier post that I couldn't see any real point in licensing HFT traders, so on that I agree with you.
Actually. I think that licensing HFT traders would do nothing more than to create a "special" group. My own approach is that NOBODY should be special. It ought to be a truly level playing field, so that the rules which apply to me as an individual retail trader/ investor should apply equally to the largest investment bank, or whoever. There should be no privileges for anyone.
I'm not yet persuaded to believe that HFT practices perform any useful functions. For instance, in the matter of creating liquidity, they may do the job, but while it may make for smaller spreads and make the price discovery route less erratic, nevertheless I think it's probably debatable as to whether cluttering the market process with a myriad of often tiny and basically meaningless trade orders (which may or may not be transacted) contributes any greater accuracy in the determination of a fair or proper price, although it MAY make a stock more readily tradable (but where's the benefit in that for the average trader, if it means he/she is, in all likelihood, being ripped off by some manipulating algorithmic trader?)
Of course, for the big boys, on the other hand, high liquidity is of great value, since it allows them to buy/sell large volumes of stock without adversely moving price.
So, who should have the advantage, the little guy or the big guy? It seems their needs are different. Well, there doesn't have to be conflict since the big guy now has the option of using dark pools. Consequently, there is no need - for the sake of liquidity - to have algorithmic traders on the regular exchange.
What other useful functions do HFT traders perform on a regular stock exchange?
