Reuters finance blogger Felix Salmon has an interesting post on high-frequency trading up today with a very interesting (and unusually high-quality, barring the first comment) discussion.
Both Salmon and the comments thread raise the possibility of a financial transactions tax to mute the effects of HFT. It’s an interesting discussion. I am personally of the view that spreads matter, but that if we can eliminate risk, even at the expense of price accuracy, we should consider it. However, the comments propose a cancellation fee instead for orders; it seems to me this would hit HFT where it hurts without needing to chew up everyone’s transactions with a tax.
And then of course there’s YOUR spread that gets eaten by high-frequency trading. Not fun, and not really just either. Maybe we should have a MARKETS FOR HUMANS! movement.
[UPDATE September 18, 2014: interesting how far I’ve evolved on the HFT tax question, which I no longer favour, but I am still intrigued by the proposal of a cancellation fee…]