macrocephalopod

Well it’s the facts.

Virtu, Citadel etc pay to execute orders at better prices than on the exchanges. 1 of the following must be true: a) these are charities, b) prices aren’t better, or c) there are others ways of profiting off these orders that disadvantage the investors. What am I missing?

That retail order flow is less informed/less autocorrelated/less toxic than institutional order flow, and having a source of order flow which is guaranteed to originate from retail allows market makers to offer a tighter spread while still making a profit?

I mean, you can still imagine ways that investors might not be benefitting from this (e.g. exchange spreads might be tighter if retail order flow made it to the exchange) but you don’t need to juice your argument by speculating about hidden ways that market makers are

So what about when HFTs see the retail stop loss orders, and smack bids as the short (even bids below NBBO) to cause a puke? Is that good or bad?

Is that a thing that really happens or is it a conjecture? Genuine question, I don’t work in HFT so I don’t know.