Comment posted How Wall Street Steals: High Frequency Trading by SM.

I sympathize with your conspiracy theory, I am prone to them myself. But I think you are looking in the wrong direction.

There have always been firms profiting from the bid ask spread on Wall Street. They used to be major banks and specialist firms, and they used to make at least 8 cents a share or more. In fact many stocks a few decades ago were quoted 25 cents wide. This adds up to a hefty wealth transfer decades ago to these firms. To make an honest comparison of value, you need to compare the cost of doing business the old way, with the cost of doing business today.

Also, I think you overestimate HFT firms ability to manipulate price. There are many firms profiting from holding financial relationships in line. For instance the basis between futures and stocks, or the performance of stocks relative to each other in a sector. If HFT firms pushed these relationships out of line, this would simply be an opportunity for other traders to profit from reversion to the proper relationships.

This debate is just a distraction from real issues, such as the Federal Reserve.

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