Tag: liquidity providers

Does high-frequency trading benefit investors?

Market participants can have a variety of legal competitive advantageous in public security markets. One of the more controversial ones is speed which is exploited by high-frequency traders (HFTs). Should the activities of latency arbitrageurs, such as HFTs, be curtailed or are they beneficial to markets?

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Grossman-Stiglitz paradox: Arbitrageurs outperform an efficient market

Consider a securities market where price-sensitive information is available only to participants who pay a fixed cost in money or effort. So only paid-up agents know the fair prices of securities. However, not all agents would be willing to pay for information. Some would argue that because there are enough informed market participants, ensuring that securities are correctly priced, why then incur the “unnecessary” cost of gathering information?

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