"Moreover, it’s not so clear that order flow information is “non-public”. No, not everyone has it: HFT has to expend resources to get it, but anybody could in theory do that. Anybody can make the investment necessary to ping a dark pool. Anybody can pay to get a faster data feed that allows them to get information that everyone has access to more quickly. Anybody can pay to get quicker access to the data, either through co-location, or the purchase of a private data feed. There is no theft or misappropriation involved. If firms trade on the basis of such information that can be obtained for a price that not everyone is willing to pay, and that is deemed illegal, how would trading on the basis of what’s on a Bloomberg terminal be any different?"
Thursday, April 03, 2014
The cost of acquiring information
Streetwise Professor discussed Michael Lewis’s HFT Book: and highlight an application of the Grossman-Stiglitz idea that there will be an equilibrium where the cost of acquiring information will be equal to the benefit of obtaining that information.