"So the bottom line: HFT is legal
frontrunning... but also so much more. In fact, like the TBTF banks, HFT
itself has become so embedded in the topological fabric of modern market
structure, that any practical suggestions to eradicate HFT at this point are
laughable simply because extricating HFT from a market - which indeed is rigged
but not only by HFTs at the micro level, but more importantly by the Federal
Reserve and global central banks at the macro - is virtually impossible without
a grand systemic reset first. Which is why regulators, legislators and
enforcers will huff and puff, and... end up doing nothing. Because if
there is one thing the TBTF systemic participants have, is unlimited leverage
to collect as much capital due to being in a position of systematic importance
in a market, rigged or otherwise.
Finally, if push comes to
shove, and the fate of HFT is threatened, watch out below, because if HFT's
presence, glitchy as it may have been, led to the May 2010 flash crash and the
subsequently unstable market which has exhibited at least one memorable crash
every single month, then the threat of pulling the marginal trader which now
accounts for 70% of all stock churn and volume (if certainly not liquidity)
would have consequences comparable to the Lehman collapse."
