as silly as it sounds, it's their job to make markets.
Impose a limit on the ratio of orders submitted to actual trades, then fine people who go over their limit (measured on a daily basis). Would cut down abuses and reduce bandwidth issues.
Why not limit number of trades? You aren't limiting number of quotes.Why not limit no of trades in a stock in a minute? Or disallow selling the stock for 2 minutes after a purchase? Or....
Why not limit number of trades? You aren't limiting number of quotes.
Why disallow selling stock for 2 minutes? Why not 1 minute, or 5 minutes then? And do you think market makers will really go for it?
But what constitutes over-regulation? In what way, for example, does what I mentioned constitute over-regulation?I just gave a hypothetical example to emphasize my point that over-regulation kills free markets.
But what constitutes over-regulation? In what way, for example, does what I mentioned constitute over-regulation?
I agree that it's a slippery slope, but having no regulation tends to lead to abusive and predatory behavior.
Obviously limiting number of trades is bad. But limiting quotes to trade ratio is largely innocuous. If you aren't getting trades, then your quote engine is either ineffective (and would signal your algo is not performing correctly) or specifically designed not to trade most of the time (which would constitute abuse).I think limiting number of trades or trades to quotes ratio is an over kill and is more generic, e.g. it could hamper trading in and out large portfolios in a fast moving market, and could ultimately affect price discovery.
Specific rules are good, but finding each possible abuse and addressing them individually is trying to use a bandaid on an open wound. At some point, you have to refactor and eliminate large classes of abuse with one sweeping rule.We should look at specific instances of abusive behavior and address them. For example, some exchanges employ rules to prevent front running which has minimal impact on overall trading.