On this video, the high frequency trader Manoj Narang argus on the benefit of the HFT on small investors.
To understand the advantage of HFT, it is interesting to review the history and see the reason of introducing this method to the market. In 1996, the justice department fond 24 cases of anticompetitive conduct from major market makers. That created many pressure on the stock market increasing trading commissions for individual and institutional investors.
Later, in 2003, New York Stock Exchange specialists executed trading orders for their own dealers prior the public customers order violating this way Federal Securities rules and exchange rules.
These two scandals made the SEC issuing regulations that took off from traditional market makers the privilege of ruling Wall Street.
A key SEC regulation was the creation and growth of all electronic trading alternative system known as ATSs that make market makers to display the best priced limited orders to buy or sell which gave the general public to enjoy better trading prices.
Please click to see: Regulation of Exchanges and Alternative Trading Systems
Please click to see: Regulation of Exchanges and Alternative Trading Systems
Ultimately, these reforms were a key of the emergence of new professionals traders that began competing against traditional Wall Street traders. These new professionals was are able to use automated computer programs to enter orders directly on the market, they are know today as “high frequency traders”.
According to the previous video, the High Frequency Trading provides to the financial market liquidities. In fact, if every trader has only long term investments, the market would frequently suffer from stock shortage. Also, HFT firms help to tighter the bid- ask spreads (difference between the bid and ask), reduce the trading costs, and triple the trade volumes.
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