hassan

bchadwick Wrote:
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But there are plenty of other times when people
talk about providing liquidity that doesn’t really
seem to fit into this view, and I wonder what I’m
missing. HFT firms, for example, talk about
“providing liquidity,” but in fact, that liquidity
can disappear instantaneously, so are they really
providing it? How are they making money, other
than, perhaps, from each other.
When the firms are trading, they’re providing liquidity. When they’re not trading, they’re not providing liquidity. Most of them are under no obligation to trade constantly, and if they do turn off their trading, you would see a measurable decrease in liquidity.
Providing liquidity is generally a profitable endeavor, though not without risk. For instance, you can’t take one side of a trade forever and just build inventory. So, you might say you’re willing to take on a position up to some limit, whether that limit is based on average daily volume or % of the float or some other metric.

hassan

so with that said, there is no confusion anymore right?….