Thursday, September 20, 2012
The Wild West on Wall Street
New reporting by the Wall Street Journal highlights a new type of trading. "High frequency trading" firms can jump ahead of normal investors and traders when it comes to ordinary stock market trading. This raises a larger issue of how our trading functions on the stock market, and what type of regulations can control this ever-developing market structure. How do you feel about this type of trading? Is it egalitarian? (link)
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When I began reading this article, I definitely felt that this type of trading was far from egalitarian and equal. However, after considering the views of the high frequency traders, it seems as if they are simply taking advantage of a certain aspect of the system. I don't tend to find this to be unfair, but simply effective strategy by these firms. With that said, if this type of trading does prove to be detrimental to the market and put it "at risk of devastating crashes" then something should be done to regulate these traders.
ReplyDeleteThis situation would seem troubling to most, but I look at it like this; We use the same type of system here at the school when choosing our classes. The upper class man have priority to get the classes they want and if any spots are left over, the option trickles down to the lower class man. This is how the world works. Most of the time we operate on a system of seniority. The firms doing most of the trading and the work, should have the right to continue their business. Smaller firms grow and one day they get the first mover advantage. Circle of life.. on wall street
ReplyDeleteMmm, not so sure I agree with your assessment comparing the two systems. At least after working on an exchange floor, I can say that it's really the one place a fair market can exist. There are many safe guards in place, offering the same contract to traders/brokers and receiving the following bid/ask prices. These high frequency trading platforms are most definitely abusing the system in place, making it terrificly unfair for traders and even brokers to complete their orders. Given the volatility of the stock market and others, I think the best way to control for large movements, would be the current system, where fairness in the market place is paramount.
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