HFT Strategies Across Markets With Single and Several Data Feeds

The Issue:

Maker-taker is a pricing scheme applied by exchanges or trading platforms. It gives a rebate to market makers providing liquidity (those offering to sell stock) and charges a transaction fee to customers who take liquidity (those looking to buy stock). Some believe the rebate system creates a conflict for brokers who may send order flow to a venue to secure the rebate and it should be abolished. SEC Chairman Mary Jo White, in a June 2014 speech, while not calling for abolition, said “when fees and payments (like maker-taker) are not passed through from brokers to customers, they can create conflicts of interest and raise serious questions about whether such conflicts can be effectively managed.”

MMI’s Stance:

Contrary to the widespread misconception that high frequency trading firms (HFTs) or Principal Trading Firms (PTFs) are reliant upon such rebates, MMI has stated publically that the abolition of the rebates is not a concern. Our Member firms trade on venues without maker-taker. And while eliminating them might mean a little less direct revenue for the firms, the incentives maker-taker provide to traders would probably find their way back into spreads and ultimately be borne by all investors. Which we assume is not the intention of regulators.