Thursday, April 23, 2015

Why Is Spoofing Bad? - Bloomberg View

Why Is Spoofing Bad? - Bloomberg View:  An overview of market microstructure.

"Who cares if the price is right? Well, you might want the price to be right if you are an individual investor buying stock in your E*Trade account on your lunch break. You're buying at 12:45 not because you think the stock is unusually undervalued at 12:45, but because it's your lunch break. It would be reassuring if the market price was as accurate as possible, so that you'd know you've got a good chance of getting a fair price. Index funds, which are similarly value-agnostic, might have similar preferences. Accurate prices probably also make spreads smaller, so trading costs for both big and small investors are lower."
The battle between short-term speculators and final money investors.

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