We last discussed high frequency trading in the aftermath of the "flash crash". Today's Wall Street Journal contains a very interesting on the topic. Among the WSJ's comments:
Jeff Engelberg, a trader at Southeastern Asset Management Inc., a Memphis, Tenn., value-investing firm with about $35 billion under management, said high-speed traders are jumping ahead of his firm's trades. "Short-term traders are able to get an instantaneous glimpse into the future" through direct feeds to exchange data, he said, turning the market into "something nearer to a casino." High-frequency trading accounts for about two-thirds of U.S. stock-market volume, according to industry estimates. Advocates of the practice include some heavy hitters, such as mutual-fund giant Vanguard Group Inc., which says it helps lower trading costs by narrowing the spread between what investors pay to buy and sell shares. Traditional money managers largely agree that some costs have dropped. But some say they find certain trades have become more expensive to carry out, thanks to a practice critics call "gaming." With gaming, if a high-speed firm's computers detect a large buy order for a stock, for instance, the firm will instantly start snapping up the stock, expecting to quickly sell it back at a higher price as the investor keeps buying.
The full article, "fast traders face off with investors over gaming", can be found at online.wsj.com
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I thought they are good at making liquidity? LOL!!!
Posted by: stock ideas | December 10, 2010 at 08:52 PM