The Cost of High-Frequency Trading

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Oct. 21 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, discusses high-frequency trading and Norway's sovereign wealth fund with Mark Crumpton on Bloomberg Television's "Money Moves." (Source: Bloomberg)


The norway sovereign wealth fund the well-qualified to take up this issue.


One point read percent of all the stocks in the world, every stock exchange, large, medium small.

They have 800 billion dollars to invest.

So much money they cannot even take the time to do the due diligence.

They just have to invest in liquid securities everywhere all the time.

The world's largest stock investor.

What is the complaint?

What they are doing is saying we have to back up and look at what happened in the market over the past few decades.

We have a chart that is part of the presentation.

Showing you very interesting things.

This is the other chart.

It will show you over the last 30 years, we have had a series of market changes we have a series -- situation of dark wills.

This shows the legal and tech changes that have increased the speed of trading.

This is getting retail investors, getting the breast rice they can.

Something like -- getting the best price they can.

70% of all trading going on of high-frequency trading.

A lot of though allegedly liquidity ain't introduced into the system is really kind of false.

That is what high-frequency trading guys say.

They say they add the quiddity to the market and make it more efficient.

That is what they say.

They acknowledge there are some cases where there are some benefits, but overall i'm a not just their fault, the regulators have encouraged a lot of the proliferation of markets.

You have relaxed regulations over time.

They have allowed non-trade venues to trade stocks.

What happens is people are not seeing the price of trades before they make them.

Price discovery is really retarded in that particular case, so people are not able to trade at the best possible price.

The irony of this is regulators always thought more would be better.

If you create more competition and bring down the pricing, it will be better for investors.

It is actually turning out worse.

What happens if there is no regulatory intervention?

We go back to the first chart and see why that is.

The short answer is latency, bringing down the time you need -- not that one, the other 1 -- if we bring down the time you need to trade, what you will do is increase profit margin.

This text has been automatically generated. It may not be 100% accurate.


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