Why You Should Care
Well, that was good timing. Mere seconds after I posted that last comment on computers and trading, I checked Zero Hedge and found this white paper from Themis Trading:
Why Institutional Investors Should Be Concerned About High Frequency Traders
It is now generally understood that high frequency traders (HFTs) are dominating the equity market, generating as much as 70% of the volume.
HFTs are computerized trading programs that make money two ways, in general. They offer bids in such a way so as to make tiny amounts of money from per share liquidity rebates provided by the exchanges. Or they make tiny per share long or short profits. While this might sound like small change, HFTs collectively execute billions of shares a day, making it an extremely profitable business.
Why should institutional or retail investors care? After all, aren’t HFTs adding liquidity? That’s what they and the exchanges, who court their business, say.
There’s a lot to worry about.
Go read it. It won’t take you long.
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