The behavior of other participants is itself a first-class signal.
Rule 611 compresses that signal. By forcing everything to orbit a size-agnostic NBBO, it collapses a lot of the “behavioral bandwidth” (depth, imbalance, sweep patterns, replenishment, cancel/replace cadence) into a single top-of-book tick. Less resolution, less information.
High-resolution flow tells you who wants what, at what size, and how urgently. When we gate execution through protected quotes, we encourage tactics that flick the top-of-book with tiny size and discourage truthful size revelation. That’s signal destruction dressed up as protection.
Letting informed counterparties print away from the protected price (to reflect size or information) increases informational content. You get cleaner read-through from actual willingness to trade, instead of a compliance-driven dance around a fragile benchmark.
So yes: other people’s actions are the best data feed. The more of that behavior we can see—in size, time, and venue—the better our discovery gets. 611 reduces that visibility by design.
If HFT was genuinely good for the entire market than absolute latency would be what matters but it is only relative latency between HFT firms that matter because they are all competing against each other using the same tactics where whoever is fastest wins.
All participants contribute to price discovery. A nanosecond order book helps with price discovery the deeper it is, regardless of whether orders clear.
> The better the computers hooked directly into the exchange get you mean.
I think you're trolling with this one. But you had an advantage typing your comment into a web browser compared to all the people who wrote theirs on paper and put it in an envelope with a stamp.
A nanosecond order book helps with price discovery the deeper it is, regardless of whether orders clear.
This is a claim, it is not being backed up by evidence.
I think you're trolling with this one. But you had an advantage typing your comment into a web browser compared to all the people who wrote theirs on paper and put it in an envelope with a stamp.
This analogy doesn't make any sense. Why would a person care about nanosecond price discovery? The only benefit is for whoever controls the computers that are able to do it and profit off of it.
If that's not true then why are these firms paying so much money to have nanosecond advantages?
Why do people doing normal trading want to avoid the exchanges that have HFT computers skimming money off their trades?
There is no mutual benefit here. If there was you would be able to explain it clearly and with evidence instead of just making claims about 'price discovery'.
The price is going to get discovered either way just as it has for hundreds of years, it happening a billion times per second does normal traders no good.
> Why do people doing normal trading want to avoid the exchanges that have HFT computers skimming money off their trades?
What's "normal trading"? A prop desk at an investment bank? A hedge fund? A pension fund? Someone who's just installed Robin Hood on their phone?
Most rational participants want lower trading costs and overheads, smaller spreads etc. HFT provides that - the evidence being "look at what the spreads are today, compared with what they were pre computerised trading".
> The price is going to get discovered either way just as it has for hundreds of years, it happening a billion times per second does normal traders no good.
Could you explain how a market participant who makes one trade a day is negatively impacted by high resolution price discovery?
> Could you explain how a market participant who makes one trade a day is negatively impacted by high resolution price discovery?
They’re negatively impacted because the SNR drops when the gain is turned up and causes algorithmic ringing to perturb the price that would be generated by high quality signal.
People who extract money by injecting algorithmic ringing into financial markets are a social parasite.
> The better the computers hooked directly into the exchange get you mean.
I need you to understand that HFT makes decisions based on human-defined parameters. It's not AI-driven. What's the difference between a human saying "these are my parameters, now CPU, go trade based off those" versus "these are my parameters, now underling, go trade based off those"
the only difference is speed, plus i suppose those underlings might suck at following their boss's directives compared to a computer
> The better the computers hooked directly into the exchange get you mean.
This implies a distinction between "our" (i.e., humans) and "the computers." Can you explain what distinction you meant if it wasn't AI? After all, everything computers do outside AI is done pursuant to knowable, describable human control, no different from pressing keys on a keyboard.
So if you didn't mean AI, I think it's worse for your argument, not better.
The difference is that I will actually explain what I mean instead of just making claims with no evidence.
Can you explain what distinction you meant
The distinction is that the computers making millions of trades per second are owned by few people and have a huge advantage. They don't lose money and they don't hold anything.
They aren't wanted by actual people making decisions, they are there in spite of what traders buying stocks to own them actually want. They are there because they make money and from the exchange and make money for the exchange.
Retail traders are the product even though they don't want to be.
It's pretty funny that there are people in this thread pretending like "price discovery" is a real thing that happens in markets based on information. We've all seen Dogecoin and BBBYQ. The emperor has no clothes.
We could make the distinction between price discovery, i.e. what price are people currently willing to buy and sell at (short-term) vs value discovery (long-term).
When I press the buy and sell button, I want the transaction to happen as quickly as possible. So does everyone else.
My millionth of a second is different than yours, and everyone else’s.
It is no different than buying or selling anything else. And there is no loss from the additional liquidity, you can easily set a limit at which you want to buy or sell.
The only way to implement this is to eliminate competition between exchanges.
There are two different things being talked about here.
Trading based on arbitrage between exchanges will happen in one way or another no matter what.
Trading millions of times per second automatically on the same exchange when some people have low latency computers at the exchange with huge amounts of extra information is not necessary.
Also, Wall Street would love this. The more of the order book you submitted, the more information you have about its composition.
The point isn't to make something 'wall street hates' it's to make something that doesn't get money eaten away by automated computers in the middle so that it's the best option for people making trading decisions on people time scales.
> The point isn't to make something 'wall street hates' it's to make something that doesn't get money eaten away by automated computers in the middle so that it's the best option for people making trading decisions on people time scales.
Why is this desirable? It seems like an argument designed only to serve the interests of a small class of person who insists on doing manual trades themselves.
The rest of what you've written just sounds like "I lost money because computers are better than me at the task." I'm not sympathetic to that concern. Computers are better than me at lots of things, so I just don't try to compete at those things. I pay people with access to the computers to do them for me, and then I focus on the things I'm good at instead. Division of labor and all that.
Anyone who isn't involved in HFT should be in favor of rules that slow down trades to human time scales. HFT currently favors a small class of rich people.
> Anyone who isn't involved in HFT should be in favor of rules that slow down trades to human time scales
What are you basing this on?
I’m a former algorithmic market maker. Every plan to “slow down trades to human time scales” I’ve seen were trivially gameable. They were always proposed by a group of concerned citizens, and then jumped on by my bosses, because if the market is slowed down to pre-HFT speeds, Wall Street can make pre-HFT profits on risk-free trading again.
Do you think the internet would work better if we forcibly increased latency? If we did, if the argument were this would flatten the market and better let small websites compete with CDNs, do you think that would actually happen? Google and Cloudflare would say “oh well,” and disassemble their servers?
Our markets have structural problems. They are mostly solvable. HFT is none of them, which is why you keep hearing about it from folks who don’t want reform.
> "How does HFT provide social benefit to the world at large?"
It's explained multiple times in this very discussion. It's not our fault if you refuse to read them. But the most straightforward and obvious way is that it injects liquidity into the market, making it easier to sell when you need to liquidate. (It also reduces volatility overall, another good thing.)
> > the exchanges weren't established for the abstract sake of money, they were established to provide benefit to people.
Snort. The exchanges were established by wealthy people, for wealthy people, to engage in business with other wealthy people.
The NYSE was established in 1792. Is it your contention that anyone except the elites were buying and selling stocks in 1792? Let alone all the exchanges that pre-date the NYSE. The Amsterdam Stock Exchange was set up in the 1600s specifically to facilitate the buying and selling of Dutch East India Company shares. Was Farmer Aardhuis buying shares? Or aristocrats and royalty?
I suspect the root argument is really against the efficacy of markets and capitalism as a useful system for humanity, in which case I say that is a fair debate. The benefits are hardly obvious today.
Retail investors railing against HFTs are sort of like those San Francisco types who protest new development to the benefit of their landlords.
It's nothing like that since there isn't a limited resource and everyone has access to the core purpose, which is to trade stocks.
What I notice with these discussions is that no one can actually explain why a retail investor or anyone would want computers trading underneath them millions of times a second.
At best they try to give hft credit for the automation that happened with computers anyway.
The only people that want it are the people doing it. That's not a business, that's a grift.
> not me. I don't mind if it takes like 20 seconds or so
Which is fine! You can probably find a broker who will give you fee-free trading with that preference. The price you execute at won’t be as good. But unless you’re trading millions, that’s probably fine.
