You might misunderstand what the purpose of HFT is - it's not about making a small margin on a huge volume of trades, it's all about order fulfillment (liquidity).
I'll try and illustrate with a contrived example. Say i want to buy 1000 shares at no more than $1 each. By using HFT, a trading firm can put together the order 'package' by combining many smaller trades at varying prices such that the average price comes out at the lowest (or target) price.
The competitive edge for a trading firm comes from being able to consistently fulfill orders, meaning they get more orders / customers.
Does that kind of explain the utility of HFT? Yes it allows a trading firm to make more money, but they way they do that is by providing a better service - not by simply exeucting a huge volume of trades and making fractions of a cent from each one.
Either way, it doesn't seem to be about actually funding companies. Maybe stock trades can help influence companies to change strategies or leaders, but I don't see the point of doing it in a forum from which the companies will never see the investment.
I don't think I understand the stock market as being anything more than a gambling game for people with a ton of money. Not sure what the IPOs of Facebook, Groupon, or Zynga did for anyone other than top execs who were already making a ton of cash per year, or the traders who bought and sold options.
Has the liquidity argument been proved in practice ? I'm not really close to trading so every time I hear about HFT is when they wreak havoc in market because of maladjusted algorithms.
I'll try and illustrate with a contrived example. Say i want to buy 1000 shares at no more than $1 each. By using HFT, a trading firm can put together the order 'package' by combining many smaller trades at varying prices such that the average price comes out at the lowest (or target) price.
The competitive edge for a trading firm comes from being able to consistently fulfill orders, meaning they get more orders / customers.
Does that kind of explain the utility of HFT? Yes it allows a trading firm to make more money, but they way they do that is by providing a better service - not by simply exeucting a huge volume of trades and making fractions of a cent from each one.