Monday, April 9, 2012

High Frequency Trading Arms Race Mocks "Free" Markets

Bloomberg Business Week April 2-April 8 2012 print edition has a disturbing article titled "Trading at the Speed of Light" by Matthew Philips

The byline: "A New Ultrafast Atlantic Cable Will Cater to Electronic Traders: 'That Extra Five Milliseconds Could be Worth Millions'"

The article explains that a new cable, named Market Express, will be 59.6 milliseconds faster than the current top carrier (AC-1, laid by Global Crossing). It will connect financial markets in New York and London. 

Only a "handful of electronic trading firms... will have exclusive access to the cable." It will allow these firms to trade faster than the competition.

The article states that about 55% of US equities trading volume is high frequency trading.

Majia here: High frequency trading allows companies to engage in a variety of fraudulent activities -- including quote stuff and naked short selling -- thereby allowing companies to 'scalp' other traders' legitimate trades

High frequency trading is an illegal tax other trading institutions must pay.

There exists a "arms race" in technologies aimed at ever-increasing trading rates so that these illegal trading practices can continue, allowing these corrupt trading entities to make money no matter what the market does.

The BusinessWeek article mentions thatNarang's Tradeworx will soon launch a wireless trading network based on microwave technology that may be up to 30% faster than fiber-optic cables.

High frequency trading makes a mockery of the idea of free markets.

Max Keiser has discussed how this occurs at some length   

Find Detailed Explanation of High Frequency Trading as a Mechanism to Manipulate Markets and Conduct Financial Warfare

Specific Examples of High Frequency Trading as Tool to Manipulate and Exploit Market Operations

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