As reported by Jim Kim, high-frequency traders–at least the ones who engage in liquidity rebate arbitrage–have been more than thankful for the Bank of America stock swoon over the last year.
As it headed toward penny stock status, it quickly became the new Citigroup in terms of being the most profitable stock to churn for the sake of maker-taker rebates. We noted that the stock had everything the HFT crowd wanted in a gravy train stock.
The AP reminds us that like Citigroup before it, the Bank of America stock now accounts for about 10 percent of all volume on the New York Stock Exchange. For market structure experts, this added liquidity–if that what it truly is–comes at a cost. While many lump all high-frequency trading into a single bucket, that’s perhaps not the best way to look at it. Most would agree that high-frequency traders in general have added liquidity in spots and helped narrow spread, and in so doing raised execution quality. But the rebate arbitrageurs have always generated lots of debate, especially about the need to tweak the maker-taker payment set-ups at exchanges.