An HFT firm's dream market: High volume - low cost of trading & plenty of active participants to trade against Low volatility - low risk of surprise losses Low price - can exploit exchange rebate structurepic.twitter.com/PHm50Ckhle
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Where is this from? And do you agree with the volatility component? I do not Not all vol is equal; realized vol is positive, gap risk is not
I think it depends on the trading strategy & the level of volatility (a 1-3 sigma move might be great for HFT, a 5 sigma move might not be), but i agree more vol is generally a good thing for HFT profits. I found it from this paper (page 4):https://www.researchgate.net/publication/343231408_High-frequency_trading_order_cancellations_and_market_quality_Is_stricter_regulation_the_answer …
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Thanks!
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Just fyi, as an academic, that journal is not considered a top tier place to publish your research.
End of conversation
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Higher vol leads to higher volumes and wider & less liquid Bid/Offer spreads. This reduces the chance of order flow trading against other order flow, and increases interaction against HFT quotes. So high vol = more volume at bigger margins and higher market share =
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