This video features a debate between Steve Kroft, 60 minutes presenter, and Larry Leibowitz, the chief operating officer of the New York Stock Exchange (NYSE). The point of Mr Leibowitz is that HFT is beneficial for the market and investors. However, Mr Kroft counters this argument by stating that computers are not humans and do not have the capacity to analyze of the companies and stocks that they trade objectively.
Also, an important point related by William H. Donaldson, former chairman and chief executive of the NYSE and current adviser to a big hedge fund, was that individual investors are losing their advantage compared to bigger institutions that have the financial and technical resources to use high frequency trading methods. Indeed, when Mr Donaldson said “This is where all the money is getting made,” ... “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage,” he was referring to the edge that high frequency specialists have over ordinary investors.
In addition, not only are individual investors facing challenges on the trading market, but firms, banks, asset managers, and hedge funds that do not equip themselves with the most sophisticated material are not able to compete. Even geographical location has an important role in the high trading process. In fact, the high trading professionals who are able to locate themselves closer to exchange servers reduce their time by microseconds when they place an order, increasing their benefit by millions of dollars. “By co-locating,” says Adam Afshar of Hyde Park Global, a high-speed trading firm, “we are able to take 21 milliseconds off our trades. In the past, 21 milliseconds was a trivial matter. Now it’s a pivotal matter.” Several academic studies have found that shaving even one millisecond off every trade can be worth $100 million a year to a large, high-speed trading firm.
To read more please click: Wall Street's secret advantage: High-speed trading. The week june 28, 2010
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