[Willem Fick]

There are three key ways in which HFTs make money:

The first way is to beat the rush. HFTs don't get insider info, they get the same info at the same time. They however run on the knowledge that the trader that can act on a piece of information first can make most money. Because of the speed at which this all is happening human intervention is simply not viable, therefore the tendency is towards extremely complex trading strategies built into high performance trading applications, and even microprocessors.

A second way is based on the fact that liquidity is good for exchanges as they profit from trade related charges. Some exchanges are therefore prepared to "reward" participants that bring liquidity to the market, as this positively influences their own bottom line.

How this plays out is that certain participants (Supplemental Liquidity Providers) are in essence paid to trade in the form of a trade rebate. This means that they do not so much profit by buying at one price and selling at a slightly higher price but rather by buying at one price and selling on at the same. As ridiculous as it may seem they can in theory even profit by selling at a slight loss, as long as the loss is less than the rebate. The amounts of money they are paid is minuscule, but as they are doing this at frequencies that boggle the mind, these small amounts add up quickly and therefore SLP business is booming.

Lastly, as the same stock is traded in multiple venues, a trading firm can use an HFT algorithm in conjunction with an order router to buy stock at one price in one venue, and sell the same stock in another venue at a higher price, as long as I can do it quickly enough before the difference in price closes up between venues.