While I could care less about HFT, Cuban does make several valid points, especially if you are a old man diaper wearing Buffett follower, who cares about spread’s and liquidity. HFT “lubing” the markets does not help the buy and hope “investor.”
Thank goodness I trade in the shitty part of town (pennystocks) and HFT’s could care less about turdball stocks that trade a few hundred thousand or couple million shares a day.
MC: That’s a bogus argument. By definition they can’t go into an equity unless there already is liquidity. To say they’re adding liquidity is like saying spitting in a thunderstorm is adding liquidity.
As far as narrowing spreads, that’s absolutely true, but in absolute terms what does it translate into? For the individual investor it might save them a quarter a month. So what? Relative to the risk that’s the worst tradeoff in the history of tradeoffs
And the argument is horrible for another reason. If you’re an investor you shouldn’t care if the spread widened by a penny, nickel dime or quarter. If you’re anything but a trader the change is of no impact to whether or not the company will be successful and create returns for investors. In fact, that anyone even considers this a valid argument is a red flag that the exchanges are more interested in traders than investors.
WSJ: What’s the solution? There have been some calls for a transaction tax recently for instance.
MC: Public companies need to figure out what business the exchanges are in. Is the market supposed to be a platform for companies to raise money for growth and to create liquidity and opportunity for shareholders as it has been in the past? Or is the stock market a laissez-faire platform that evolves however it evolves? The missing link in all the discussions is: What is the purpose of the stock market?