“I hope you are enjoying a long weekend. I came across this interview with the 'Inventor of HFT' which is a great story on many levels, and a surprise warning...alas the genie is out of the bottle.”
Eoin Treacy's view Thank you for this educative interview which highlights the innovations that led to the current environment high frequency traders exist in and the extremes to which the sector has evolved.
There is little doubt that program and automated trading helped to reduce commissions in the financial markets which can be viewed as a positive from the perspective of investors. However it should also be highlighted that just as with foreign exchange bureaus offering zero commissions, spreads and market slippage are also important considerations. Automated traders do not provide value in either of these regards.
What we are now faced with is a situation where automated trading systems are front running just about all orders and represent a significant threat not only to confidence but to the integrity of the system. This suggests that if the capital formation function of the market is to be preserved, the sector needs to be more closely scrutinised by regulators.