High Frequency Trading
October 1, 2009
High Frequency Trading
High Frequency Trading is software program. This is programmed to assist the stock trader. It allows them to collect the buy or sell order flow and helps to execute the order first in the flow. As you know in stock market every second is a precious second and it worth a lot. It is questioned by many specialists about putting your order ahead of the flow with help of this software.
According to reports many traders are using High Frequency Trading. The trading volume of the trade has increased over the past few years. In 2008 profits were estimated between $ 8 billion and 21 billion.
Actually this software enhances your efficiency. Before it you executed an order wait for its process while the indexes were changing and you were waiting for your order to be processed.
Alan Schram, Managing Partner of Wellcap Partners, a hedge fund based in Los Angeles expressed about High Frequency Trading
“cause retail and institutional investors to chase artificial prices, make markets less efficient and systematically transfer wealth away from ordinary investors,”
There are some questioned about the fairness of this software. Is it legal to jump in front in the queue? Yes it makes a huge difference to be in first place in stock trading but its fairness and legality is questioned.
This practice put some investor ahead of other investors so there is no concept of fair trading left. If the trust in the stock market shatters then who will invest in the stock market.