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September 2012

High-frequency trading â split seconds [Financial Times]

September 28, 2012 by mikeohara   Comments (0)

Constraining the relentless advance of technology is rarely easy. But that is no excuse for not trying when its potential effects may be damaging. High-frequency trading, via ultra-fast computerised programs, does not pose huge societal risks. But it does bring very limited general benefits. Advocates claim that it provides liquidity and improves price discovery, but these gains can prove ephemeral if the supply of liquidity is itself highly volatile. And while the evils of HFT are often overstated, its proliferation has on occasion hampered robust, transparent “quality” markets to the detriment of other investors. High-frequency traders may not have initiated the 2010 “flash crash” in the US – when the total US stock market capitalisation fell by $1tn in 30 minutes. But their presence made the tailspin harder and faster.

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High-frequency trading â split seconds [Financial Times]

September 28, 2012 by mikeohara   Comments (0)

Constraining the relentless advance of technology is rarely easy. But that is no excuse for not trying when its potential effects may be damaging. High-frequency trading, via ultra-fast computerised programs, does not pose huge societal risks. But it does bring very limited general benefits. Advocates claim that it provides liquidity and improves price discovery, but these gains can prove ephemeral if the supply of liquidity is itself highly volatile. And while the evils of HFT are often overstated, its proliferation has on occasion hampered robust, transparent “quality” markets to the detriment of other investors. High-frequency traders may not have initiated the 2010 “flash crash” in the US – when the total US stock market capitalisation fell by $1tn in 30 minutes. But their presence made the tailspin harder and faster.

read more...

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