The orders resting on BATS were typically just the 100-share minimum required for an order to be at the front of any price queue, as their only purpose was to tease information out of investors. The HFT firms posted these tiny orders on BATS-orders to buy or sell 100 shares of basically every stock traded in the U.S. market-not because they actually wanted to buy and sell the stocks but because they wanted to find out what investors wanted to buy and sell before they did it. BATS, unsurprisingly, had been created by high-frequency traders.
The high-frequency trading (HFT) firms utilized minimal orders on the BATS exchange, typically the smallest size of 100 shares. These orders were not aimed at genuine trading; rather, they served as a strategic tool to extract information from unsuspecting investors about market preferences and intentions. By placing these negligible orders, HFT firms could gain insights into buying and selling trends without actually committing capital to real transactions.
BATS, the marketplace for these activities, was established by HFT firms themselves, reflecting their vested interest in maintaining control over market dynamics. The use of such tactics illustrates how the trading landscape can be manipulated by sophisticated players who prioritize information acquisition over traditional buying and selling. This practice has significant implications for the integrity of market activities and the experiences of regular investors.
