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It's not a large problem and that's exactly why the high frequency trading industry is tiny. You only think it's big because it gets disproportionate attention
by murbard2 11y ago
It's not a large problem and that's exactly why the high frequency trading industry is tiny. You only think it's big because it gets disproportionate attention in the media.
- abalashov 11y agoI guess it depends on how you bracket the problem and how you define "large". According to http://www.marketswiki.com/mwiki/High-frequency_trading http://www.marketswiki.com/mwiki/High-frequency_trading, "It was estimated that as of 2010, high-frequency trading accounted for an estimated 50 to 70 percent of trading."
- murbard2 11y agoYes, that's absolutely natural. That's like saying 50 to 70 of Internet traffic went through an ISP.
- abalashov 11y agoI suppose. I mean, I get the difference between quality and quantity, but if we're talking about the gravity of the problem, the knowledge that 50-70% of trades are HFT/automated tells us something about the nature of our securities, commodities, etc. markets. Doesn't it?
- mrchicity 11y agoBut why does that astound you or strike you as a problem? Look at any mature market and you'll find middlemen buffering supply and demand. Imagine: 50-70% of auto transactions are between dealers who don't even drive their cars and only own them for weeks! 50-70% of bread transactions are between distributors and supermarkets who don't even eat bread and want to sell it in days or even hours!
- abalashov 11y agoThat's a good point. I suppose I assumed that the 50-70% figure referred to front-side securities, futures, or commodity transactions (the equivalent of an end-customer buying a finished product in a retail transaction), rather than amongst various intermediate levels in a complex supply chain.
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- srean 11y ago>Its not a large problem is a very charitable way of putting it.