High-frequency trading insanity

[n2doc]

In today's stock market, there are two types of trader.

One, the traditional investor, places a buy order based on a belief that a company will prosper and that its price will rise, or a sell order based on the opposite belief.

The other, the high-frequency trader, deploys massive computer capacity and complex algorithms to buy and sell individual stocks multiple times in a fraction of a second, all in search of micro-profits with each trade. This trader cares not a whit about a stock's fundamentals.

In a sane world, high-frequency trading would be a minor specialty at best. But in the bizarro world that Wall Street has become, such activity now makes up the majority of all trades. It is manufacturing risk while siphoning money and talent that growth-producing sectors of the economy need.

It has also sparked a technological arms race aimed at shaving milliseconds off each trade. New, more direct fiber optic cable routes have been laid between major trading cities, and now there are even serious proposals to position drone aircraft over the Atlantic Ocean to speed transmission times between New York and London.

more

http://www.usatoday.com/news/opinion/editorials/story/2012-09-26/high-frequency-trading-crash/57846524/1

[RC]

1. High speed trades need to be outlawed.

The serve no useful purpose, except for the monied greedy and are in fact detrimental to the general good.

[n2doc]

2. Just Tax them

$1 a trade. Would get rid of most of the crap. Wouldn't affect in a significant way regular investors.

[Frustratedlady]

4. I agree. Didn't they try that a few years ago and it got knocked down?

It has pretty much scared people out of trying to invest on their own...at least it has for me. It's just for the big boys. I don't think WS has the control they had 30 years or so ago.

Since they've invested so much money in those computer banks, they aren't going to go quietly into the night. Charging per trade will surely slow them down.

[rdking647]

8. even better

make it so there is a 1/2 second delay to cancel an order.

that will end HFT. a tax on trades wont work since the majority of HFT orders are cancelled

[randome]

3. It's not insanity. It's human nature to always improve.

But the technology has gotten too fast for the economies they are part of so it's time to pull it back with sensible legislation.

Slow down the trades.

[Egalitarian Thug]

5. In a sane world, high frequency trading would be against the law. Like 90% of the financial sector it

is completely extractive and contributes nothing to America, our people, or our economy. OTOH it is frequently destructive to companies that would otherwise attract actual investment that would allow them to expand, develop, hire, etc.

There is no greater good to this pillage.

[BumRushDaShow]

6. And Goldman Sachs has the fastest computer

Remember reading a whole article about that a couple of years ago - I think when they went after the programmer who stole their algorithm program.

Some interesting info - http://zerohedge.blogspot.com/2009/07/goldmans-4-billion-high-frequency.html

[PufPuf23]

7. The returns are based upon arbitrage based upon market volatility.

The algorithms themselves when linked with the automated technology generate volatility.

A transaction tax equal to the arbitrage margin ("deploys massive computer capacity and complex algorithms to buy and sell individual stocks multiple times in a fraction of a second, all in search of micro-profits with each trade&quot is sanity and would do much to make capital markets level and honest.

[Ikonoklast]

9. Or just level the playing field by putting a minimum time limit on trades.

Wall Street is no longer a place for small investors, it's a huge casino rigged against you.