Thank you for clarifying. You're talking about retail speculators getting "stopped out".
Do you have a reference showing that is happening with increasing frequency due to HFTs? It runs counter to my intuition because HFTs lead to less "gappy" markets and markets that respond to news events more quickly. For the purposes of this comment I will assume that this is true.
Is the amount that retail speculators lose to increased frequency of getting stopped out greater than the amount they gain from tighter markets? I don't have a clear opinion on this.
Is the net loss to retail speculators greater than the net gain to all other market participants? I suspect not because retail speculators are such a tiny portion of the market.
If this kind of volatility has increased with HFTs, it's caused by an overly small tick size. Markets will go back to how they were if you increase the tick size back to 1/16 of a dollar. This wouldn't help price takers other than retail speculators, but that's how you fix it if it really is a problem.
Do you have a reference showing that is happening with increasing frequency due to HFTs? It runs counter to my intuition because HFTs lead to less "gappy" markets and markets that respond to news events more quickly. For the purposes of this comment I will assume that this is true.
Is the amount that retail speculators lose to increased frequency of getting stopped out greater than the amount they gain from tighter markets? I don't have a clear opinion on this.
Is the net loss to retail speculators greater than the net gain to all other market participants? I suspect not because retail speculators are such a tiny portion of the market.
If this kind of volatility has increased with HFTs, it's caused by an overly small tick size. Markets will go back to how they were if you increase the tick size back to 1/16 of a dollar. This wouldn't help price takers other than retail speculators, but that's how you fix it if it really is a problem.