Institutional Detail on the Armchair
Armchair theory can sometimes look naive from the perspective of institutional detail. Case in point, my recent post on high-frequency trading in which I speculate how best to allocate the privilege that HFTs enjoy of proximity to exchange servers and access to dark pools. In other words, what do the HFTs pay for their advantage? And who is receiving these payments? Clearly there are capital investments (a form of private sector rent seeking). But I wonder if there are forms of licensing…
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