High-speed trading fading a bit, but upping the ante

An article on The Atlantic’s website caught our eye a while back, offering a couple of fresh perspectives on one of the financial world’s more unsavory practices, High Frequency Trading. This is the computer-driven “innovation” that can by and sell stocks at truly inhuman speeds, down to milliseconds.  As author Matthew O’Brien notes:

It’s Wall Street at its most socially useless. HFT funds aren’t allocating capital to where they think it’ll be most productive. HFT funds are allocating capital to where they think other people will put it 50 milliseconds from now. It’s a tax on everybody else.

While close to half of all stock trades are now part of this rush for making huge numbers of tiny profits, the good news is that HFT trading is slowly losing steam from its initial peak a few years back, now that they’re competing not just with humans and good-old-fashioned computerized trading, but with other HFT algorithm-bots.  Yet apparently, these outfits continue to milk their technical edges; the article concludes with reports of purchasing new public data a few seconds before it’s widely released, thus giving the bots more than enough time to get a jump on their human competitors.

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Jim Cummings

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