High Frequency Trading--here to stay--
High Frequency Trading: Must Separate Fact From Fiction Says NYSE COO Leibowitz | Breakout - Yahoo! Finance: " . . . "The reality is, technology is here to stay, and has been a huge windfall for end investors, whether retail or institutional" through lower trading costs and faster systems, he said. "The real question is: How do we regulate and surveil it in a way that gives people confidence that they have a chance?" Cheap trading technology and regulatory changes in the early-2000s spawned new electronic market systems, some of which catered to automated, high-volume, super-fast trading strategies seeking to profit from fleeting price inefficiencies and barely detectable waves of buy and sell orders. As Leibowitz says, high-frequency trading . . . is simply electronic trading by automated means, one where "a bit of a bubble" arose as the financial crisis created lots of the volatility and volume that such systems are built to feast on. While in some respects these players were filling a void left by the exit of traditional market makers and floor specialists as those middlemen's profits were squeezed, HFT grew by some estimates to account for more than half of all turnover in U.S. stocks in recent years. The 2010 "flash crash," the botched debut of Facebook Inc. (FB) on the Nasdaq (^IXIC), and Knight Capital Inc.'s (KCG) rogue trading software this year raised further concern about the fairness and stability of our networked markets. Leibowitz believes the broad public suspicion of the market mechanics - now vexingly complicated, with more than a dozen exchanges and perhaps 50 "dark pool" electronic markets - is based on "more fiction than fact." It's the job of the Securities and Exchange Commission and the industry to help "separate fact from fiction," he adds, pointing to the futures markets' move to tag and report HFT order flow as a good start in tracking potential abuses. . . . "
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