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The Impact of High-Frequency Traders

The recent appearance of Michael Lewis, author of Flash Boys: A Wall Street Revolt, on 60 Minutes, created quite a stir about the impact of high-frequency traders (HFTs), claiming the game was, and has been, rigged, with the victims being all investors.

High-frequency trading is a set of computerized trading strategies characterized by extremely short position-holding periods. In high-frequency trading, programs running on high-speed computers analyze massive amounts of market data, using sophisticated algorithms to exploit trading opportunities that may open up for only a fraction of a second. After Lewis’ appearance I received many questions about the impact of HFT. Is Lewis right about investors being hurt by HFT? The answer is that it depends.

Read the rest of the article at Seeking Alpha.

 

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