The Canadian trading world's reaction to this week's Streetwise column in the paper on the cost of high frequency trading being borne by retail investors is an extremely polarized one.
(The Cole's Notes version of the column is this: The way stock market trading fees are structured, some investors (often retail) end up subsidizing professionals at high frequency trading shops.) The reaction has been either "Erman, you're spot on" or "Erman, you have totally missed the point," with basically nobody in between.
In general, the latter is coming from parts of the street that have allied themselves with high frequency and electronic trading, arguing that it's the way of the future and comes with significant benefits for all investors in the form of tighter spreads, faster execution and new order types and other technology. In this particular case, they point to the fact that broker fees are very low these days, under $10 a trade at most discount brokers, even including any costs to pay trading fees that fund rebates for HFTs. They also argue that many brokerages could manage order flow and educate investors so that the costs are not skewed.
They say that the disappearance of pricing that draws HFTs would lead to a return to wider spreads, with the profit from market making in the industry shifting from HFTs back to the Canadian brokerages who benefitted from those wider spreads between bid and ask prices prior to the arrival on the scene of high frequency traders.
The thread running through both sides of the argument is that one way or another, there are costs for having somebody willing and able to buy your shares if you want to sell immediately. In today's market, that cost is paid through a fee that is mostly passed on to the HFT firms that have become modern day market makers. Prior to the entry of the HFTs, the cost was built into the bid-ask spread set up by market making brokers.
Either way, investors pay. It's just who collects that's at issue.