High Frequency Trading

High Frequency Trading: Fraud...At the Speed of Light

Excatly what lengths will the professional traders and institutional investors go to to bilk money out of the general retail trading public in the shortest amount of time possible? Evidently, they are going to HUGE lengths both in cost and scale to accomplish their goals with their powerful trading systems.


What is High Frequency Trading?

If you walk down a typical street in America and ask people if they know what "High Frequency Trading" is, then you probably be faced with some bewildered stares. This is not surprising.

A High Frequency Trading ( or HFT ) system is an extemely high-speed computerized trading network designed to literally trade millions of times per minute with the sole perpose of trimming very small fractions of a share price off some stock, ETF or other security off to the owner of the system.

HFT's play a large role in the increase in death-defying plunges ( think May 6th, 2010 "flash crash", and Apple's recent single day plunge ) and extreme volatility witnessed in the financial markets as a whole in recent years.


SEC Chairman Mary Schapiro was quoted on September 22, 2010 saying:

...high frequency trading firms have a tremendous capacity to affect the stability and integrity of the equity markets. Currently, however, high frequency trading firms are subject to very little in the way of obligations either to protect that stability by promoting reasonable price continuity in tough times, or to refrain from exacerbating price volatility."









That was another way of saying that not only do they not try to stabilize the market, but they add significantly to that instability and volatility of the markets in general.


Why should you care about HFT's, anyway?

Because they ultimately take money from you - on the smallest monitary scale while trading. These are systems that are just another weapon that the Professional traders use to profit by trimming of your money on a regular basis. HFT accounts for 70% of all equity trading volume in all US-based markets - that number is in the hundreds of billions of dollars each day.



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