What is the Money Board's opinion on high frequency trading?

Did you just watch the latest Daily show on hulu by chance?

Trade through a 401K and avoid CG taxes.

I don't care much.

One thing many commentators are missing is that HF traders are essentially beating the big Wall Street firms at their own game. They are not competing against you and me.

LINK

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1. HFT doesn’t prey on small mom-and-pop investors. In his first two TV appearances, Lewis stuck to a simple pitch: Speed traders have rigged the stock market, and the biggest losers are average, middle-class retail investors—exactly the kind of people who watch 60 Minutes and the Today show. It’s “the guy sitting at his ETrade (ETFC) account,” Lewis told Matt Lauer. The way Lewis sees it, speed traders prey on retail investors by “trading against people who don’t know the market.”

The idea that retail investors are losing out to sophisticated speed traders is an old claim in the debate over HFT, and it’s pretty much been discredited. Speed traders aren’t competing against the ETrade guy, they’re competing with each other to fill the ETrade guy’s order. While Lewis does an admirable job in the book of burrowing into the ridiculously complicated system of how orders get routed, he misses badly by making this assumption.

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Simplifying a little, US financial markets are basically split into two tiers - mom and pop, and big banks. The whole HFT discussion is about how the big boys play with each other and has nothing to do with you and me.

It's basically algorithmic trading done by computer systems to "front run" stock market orders. In theory this should be illegal but as of now its unregulated due to the complicated nature of the way these systems operate.

These firms can skim a few pennies or even fractions of pennies on countless millions of trades without risk because they can get in front of the bid/ask and buy and sell in fractions of seconds.

It's really only the tip of the iceberg in a market that is totally rigged and manipulated. With that being said I'll be up a 5:am with a hot cup of coffee pondering my next move in the stock/options market.

exactly, they can monitor when the large traders are making moves. When the large traders place an order, the high frequency trade computers sense it, immediately trade based on that order, and have the ability to jump to the front of the line and counteract the large order before it can be enacted.

For example: a large firm decides to buy 10,000 shares of X Corp. The high frequency trader can start buying that stock before the order is carried out, causing the price to immediately rise before the large firm's order can be processed. Then, the large frequency trader can act as the intermediary and sell their stock to the large firm. Basically, the large firm gets robbed because the high frequency trader knows the large firms move before it technically makes it and can act accordingly.

The high frequency trader is like a Magic: The Gathering player who can play all of their cards at instant speed while the opponent plays everything at sorcery speed. #NerdAlert!

Working in the trading technology space I've heard a lot about this the last few days. I think there is a lot on confusion surrounded exactly what HFT is and where they fall into the system as a whole. In reality, they are very small. The industry only made ~$1B last year, peanuts when you compare them to the amount of trading volume that occurs everyday.

At the least, calling the market rigged because of this is a gross exaggeration. I'm not saying I agree with what they do but the exchanges give them this ability and they are simply profiting from it.

Who are these HFT's? Are there any company names? Isn't it kind of a form of insider trading?

Since the consensus opinion in this thread is HFT is less than honest, how should it be regulated to correct its wrongs?

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Who are these HFT's? Are there any company names? Isn't it kind of a form of insider trading?

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Goldman Sachs was one of the very first in 2009 I think?

These firms are using available resources to obtain public data milliseconds before others and profit on it. I'm not sure that you can call it front running or not, and it's definitely not insider trading. Like most arbitrage opportunities, the market has caught up and HFT firms are executing less trades and making less profit than they were a few years ago.

On the outside, and without using all of the sensationalizing terms(rigging), this is American capitalism at its finest. I think the real question is whether or not this causes unnecessary volatility in the market. There are some places that HFT arbitrage has a place, like stocks that trade in multiple countries keeping their prices in line, but I can't honestly say I know enough about the current HFT trading procedures and regulations to agree or disagree on the volatility debate.