High-Frequency Trading Has the Potential to Kill the Markets
Aug 17, 2012
It’s no wonder the public is scared to invest in stocks. They believe the game is rigged.
It is, and I’m going to tell you who’s behind it, what’s really happening, when it started, where the sinkholes are, why they’re there, how you can play in the short run, and how America can get back to investing in a successful long-term future.
The bad news is the problems infecting our capital markets are all systemic. The good news is that they can be eradicated one by one, if not all at once (which won’t happen).
Today, we’re going to look behind the curtain of high-frequency trading.
It’s a nasty bug in the system and has long-term consequences, including the potential to kill the markets.
First of all, high-frequency trading isn’t just what you think it is. It is much more than you know, and is in fact part of the fabric of the markets.
High-frequency trading (HFT) is known to be a game that specialized firms and trading desks play. Here’s what most people think they know about high-frequency trading.
The HFT crowd uses super-fast computers to execute trades across different exchanges. There are 15 exchanges in the U.S. and more than forty “dark pools” (private trading venues that serve as de-facto exchanges) where shares can be traded.