High Speed Trading? Ho Hum.
This probably isn't new news to many of you, but I was reading an article today entitled Stock Traders Find Speed Pays, in Milliseconds that talked about the fact that some of the 'supercomputers' that some of the 'big guys' use might be giving them an unfair advantage in stock trades, allow them to possibly manipulate stock prices, and reap huge profits.
I'll admit, one part of the article made me gnash my teeth:
The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds -- 0.03 seconds -- in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.
That's a loophole that in this Fool's opinion should be closed.
Why then do I say 'Ho Hum'?
The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.
Thats about 0.6%. Considering that I invest in stocks to meet long-term financial goals and generally hold my stocks a long time, I'm not personally terribly concerned about this increased 'cost'. Make no mistake, what's fair is fair, and if an order is supposed to be shown to everyone simultaneously (as it should be in a completely free, open, and fair market) then it should be. Being able to pay a fee and get information on stock prices and offers not available to the other market particpants is just plain wrong.
But this Fool isn't going to lose any sleep over it.
Russell (a.k.a. TMFEldrehad)