But it does if I have to buy it at higher price just because Avis knew a that I and a few fellows where to buy the car 2 min in advance because he saw us asking about that car, bought the available stock of car we were interested in to the car dealer, propose them at a slight premium to the the car dealer who then finally sell it to me and my fellow 1 minute later at another premium because, you know, it has to make its own margin. The whole thing happening just under my nose.
That's how I (unobjectively I concede) feel about HFT.
Ok, now let's take that thought experiment and make it closer to the real world:
Imagine that Avis is buying cars in bulk and getting better deals as a result, and then imagine that the knock-on effect of them doing that is that you get better deals on cars because of how they change the way the car market works.
Car dealerships are, for obvious reasons, really fucking upset about this. And they are noisy and well-funded. Normal people start getting angry at the giant rental car companies and the unfair advantage they get, unaware of the fact that without those companies, they'd be getting screwed even worse by the dealerships.
That's what HFT does to normal investors. You don't have to take my word for it; the Chief Investment Officer at Vanguard, among many other people, has said exactly this.
If you create an ad on television stating that you are buying tons of a particular model and make of car, and then demand for that car goes up, why is this seen as a negative in a functioning economy? A functioning economy responds to demand.
Now what is the difference between sending an exchange an order for more shares than they have available and a television ad broadcasting your buying intent? In this day and age: not much.
What isn't happening: small traders, like you and I, are not sending small trades to markets and having them be "intercepted" by HFTs. HFT's wouldn't pay attention to the "guy buying one car" type of trader, and there isn't enough of a difference in the signal (your trade) and the current market price to be arbitrageable.
This would just be price correction, if a given car is becoming popular then it makes sense for it to cost more. Likewise if a given car is becoming less popular Avis would be willing to shift their excess stock at a discount.
Once again, this time with feeling: HFT firms don't prey on pension funds, mutual funds, or value investors. They improve things for those kinds of investors. HFT firms prey on other sell-side firms.
