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SEC Investigations Into High-Frequency Trading Under Way
by harharmahadev Wed Apr 02, 2014 8:30 am
SEC Investigations Into High-Frequency Trading Under Way
SEC and CFTC Are Looking Into Ties Between High-speed Traders and Major Exchanges
LINK
I have always believed that High Frequency Trading was a highly dubious practice. It skewed stock market prices to such an extent that the retail investor was destined to lose money.
I am not surprised that this issue has become the 'hot topic' of the day. SEC and CTC are investigating into this practice and I'm highly certain that they will unravel several malpractices. However, wall street crooks tend to be above the law. So they will get away. But HFT will come under heavy regulation. This will impact stock market prices .. and, most likely, in a very hard way.
Here's why.
Per unofficial estimates, 70% of the trades on wall street are hfts. If you cut down hft by 25%, then you have slashed overall trades on the floor by ~18%. That's a big deal. HFTs are based on price value comparisons between various asset classes. If the algorithms are not correct, it could end up skewing prices of one or more asset classes. If multiple HFTs are performing similar or slightly conflicting strategies, asset pricing could go haywire. If HFTs wind down, price adjustments could be sharp and cataclysmic.
For example - there is contango in the gold trading market (LINK). If HFT winds down, it is quite possible that gold (and gold miners) will spike sharply. Stocks, especially high flyers such as FB and tesla, might take a hit. It might get ugly over the next few months.
SEC and CFTC Are Looking Into Ties Between High-speed Traders and Major Exchanges
LINK
I have always believed that High Frequency Trading was a highly dubious practice. It skewed stock market prices to such an extent that the retail investor was destined to lose money.
I am not surprised that this issue has become the 'hot topic' of the day. SEC and CTC are investigating into this practice and I'm highly certain that they will unravel several malpractices. However, wall street crooks tend to be above the law. So they will get away. But HFT will come under heavy regulation. This will impact stock market prices .. and, most likely, in a very hard way.
Here's why.
Per unofficial estimates, 70% of the trades on wall street are hfts. If you cut down hft by 25%, then you have slashed overall trades on the floor by ~18%. That's a big deal. HFTs are based on price value comparisons between various asset classes. If the algorithms are not correct, it could end up skewing prices of one or more asset classes. If multiple HFTs are performing similar or slightly conflicting strategies, asset pricing could go haywire. If HFTs wind down, price adjustments could be sharp and cataclysmic.
For example - there is contango in the gold trading market (LINK). If HFT winds down, it is quite possible that gold (and gold miners) will spike sharply. Stocks, especially high flyers such as FB and tesla, might take a hit. It might get ugly over the next few months.
harharmahadev- Posts : 1155
Join date : 2011-04-29
Age : 51 -
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