Are the shares worth 26.40? Then you should be happy to get them for 26.39. If they aren't worth it, then don't make that offer.
I don't see why you should care who sells you the shares. You either want them or you don't.
I don't see why you should care who sells you the shares. You either want them or you don't.
Personally it just feels wrong in some hard to define way to algorithmically determine the other sides maximum/minimum price through some process they don't have access to. I can certainly understand why you would do it but it just doesn't feel quite right.
I don't think I have an ethical problem with using small orders to sound out the other party. Where it tips over into being unethical for me is if those exploratory orders are cancelled rather than fulfilled. I'm surprised its even possible to cancel your offer once someone else has accepted it.
If another participant besides the HFT algo on the local exchange had been willing to take the other side of the initial price offered, then the HFT firm would not benefit from "probing" for the price.
And, what's to stop the entity buying a large quantity of shares from strategizing to account for HFT strategies?
The core reason that exchanges offer an advanced look at trades is to try to pull liquidity out of parties that create no transaction fee overhead before passing it to the rest of the market. The price will never be worse than what would have occurred if the trade had been allowed to go out to the rest of the market.
The author of the article is essentially just complaining that his own crude algorithm has been outsmarted.
Not on stock exchange though.
The only way the example in the article would be if there were no other available sellers at a price below 26.41 (in which case I'm curious why an algo would bother sounding starting at the low end instead of the high end. The only ways to get such a wide market would be for all the other sellers to have disappeared (in which case the buyer is not disadvantaged by the HF algo because he is getting his order done rather than not) or for the HT algo to have made a guess that other people would be willing to pay a higher price in the future for BRCM and bought all of the shares available up to and above 26.40 which is the definition of a short-term trading strategy and, I should also add, full of risk that the price that you just pushed .30 will fall back down without you having a chance to get out hence making it a losing trade.
It means I will buy less shares of other companies. I will have less money, for the same goods.
The problem is the larger perspective of the market structure being weighted in favour of certain participants. A particular class of investor is given a specific advantage by the supposedly neutral exchange, and they use it so systematically exploit an edge that doesn't exist for you or anyone else. That is wrong.