We doubt that these old-school managers were truly better off in the pre-HFT world, but it's hard to prove either way. And if they're right, it may be only because HFTs have made the markets more efficient
Author Michael Lewis’s argument that U.S. stock trading is rigged reflects a misunderstanding of how the market operates and its history, said Bill O’Brien, the president of exchange operator Bats Global Markets Inc.
Federal agents are investigating whether high-frequency trading firms break U.S. laws by acting on nonpublic information to gain an edge over competitors.
Critics including some regulators and market participants say that HFT trading, which captured the spotlight in the May 2010 flash crash, serves little purpose, may distort the market and leaves retail investors at a disadvantage.
The authors state that they want to get away from the debate over whether high frequency trading is good or evil, but the underlying theme is that HFT is damaging the markets.
Trading is now effectively non-stop, with transactions measured in millionths of a second. Budish, an associate professor of economics at the Booth School of Business, proposes to instead segment trading into thousands of auctions throughout the day.
For all of its influence over the short term, price discovery of an array of asset classes and notable the precious metals, high frequency trading (HFT) fuels an even more ominous trend. The speed and widespread use of trading algorithms have expanded the gap between fundamentals further than anyone could have imagined.
Commodity price performance has lulled the speculative community into a sense of complacency. The speed with which accidents can happen can only be imagined in the context of flash crashes. That is when gold and silver shine.
Technical analysis will always have a place in the speculative marketplace. Its function may not be reading tea leaves, but its connection to fundamentals is about as useful as the modern day consumer price index.