The Goldman Sach's HFT Story is refusing to die...
So it seems Goldman Sachs may have brought more attention to High Frequency Trading (HFT) than they wanted in their legal action towards Mr. Alekynikov. Again though, it was pretty much a Catch 22 for them.
The question remains if this will be a watershed story in revealing or sensationalizing the way large investment banks are able to trade. The question remains, if enough attention comes of it, will the legal loopholes allowing it be closed?
From what I've read, it seems their advantage is that for a certain amount of milliseconds, they were able to see buy and sell orders at just the moment before they were executed and their trading platforms were able to trade based on this information.
The defense of this is that "anyone" is able to access this data (of course it involves a huge infrastructure that basically would have to sit right next to the NYSE computers in order to achieve the millisecond latency needed to act on the data).
In my opinion though, High Frequency Trading is basically a form of high tech insider knowledge of all the trades taking place on the exchange. Stocks traders should be angry about this, but so far it just seems people aren't aware of exactly what Goldman Sachs and other institutions participating in High Frequency trading are up to. By exaggerating the fact that it is "only milliseconds" it seems minor, when in fact their entire trading platform and strategy is built on these milliseconds and frankly is rather foolproof.
I caught three blog & news stories on them this past week, if you care to read: