Comment Text:
The reality is that HFT trading is just traders using computers to scalp profits from the market that market makers and traders have been doing for years and decades ago. The margins in intra-day trading is 10: 1 in some cases. Market makers who are obligated to put a bid or ask don't want to put a bid and ask and get ripped off by HFT machines who don't have to put bid or ask to make a market and these HFT machines just suck money from the market without providing any liquidity. Liquidity means putting a bid when there is no buyers and putting sell order when nobody is selling. What is needed is reinstate in the 'uptick rule' in NYSE stocks are reduce the effect of ES trading. The margin in the futures ES is the market now. The margin is like 10% or 5% of the underlying value of the stock so when the price is crashing it will crash hard. The uptick rule is important because in falling prices nobody buys the ask and there is no bids. What the HFT machines do is do market orders wiping out bids which causes a quick 'dip' in the market causing all buyers to pull bids. Even the market makers doesn't have the cash to buy or the sell orders. The market makers are not obligated to buy and lose money. Market makers are in th business to make money. What the May 6 crash just proves is the stock market is illiquid. Majority of large orders are not done in the 'open marke't. Most of the instiutional traders are done in dark pools or OTC. Hence the 'open market' must have trading rules like margin controlls and cancellation controlls and uptick rule. And restrictions on putting fake bids and fake sell orders if they are not serious bids or serious sell order. Banning market manipulation or gaming of the market. Market order cancellation rules needs to be implaced for HFT machines. And limits in orders if the buyer or seller doesn't have enough cash to honor the bids or ask orders. These rules would just make the market more like 'real market' and less like computer game. Banning naked access to market information or market data. Enforce SHO rules. Restrictions on long margins and naked short selling. Can't buy stock with no money and can't short when there are no shares to short. The market should be like real market not a phantom market computer game.
