Email of the day 2
Comment of the Day

April 04 2014

Commentary by David Fuller

Email of the day 2

On the markets affected by HFT: 

“I am happy that Michael Lewis wrote about HFT. It was about time someone told the truth. However, I was wondering if HFT is a practice used only on NASDAQ and NYSE or also on European and emerging markets? I can't figure out if it is a local problem or a global problem, thank you.”

David Fuller's view

Front running with HFT’s sophisticated algorithms is the nearest thing to innumerable small profits at minimal risk for HFT firms.  Therefore they will go and trade anywhere they can, without fear of prosecution.  However, the same problems will occur as we have seen on Wall Street.  An HFT firm would like to operate on its own but success invites competition.  Other market participants will understandably resent the front-running.  Hopefully, officials at other exchanges will learn from Wall Street and not pretend that front running, even on a tiny scale for each individual trade, will not quickly steal billions from other investors.  There is a real danger that autocratic and kleptocratic rulers will want to corner the market for HFT front-running in their own markets.

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