High Speed Traders Damage the Markets: Study


High-speed traders make money off the back of small investors without taking much risk themselves. So says a study by the chief economist at the Commodities Futures Trading Commission (CFTC), the U.S. derivatives regulatory body.

High frequency trading firms (HFTs) "derive their profits from fundamental and small.investors," Andrei Kirilenko said in a recent conference. "HFT profits increase in aggressiveness."

"Critics of high-speed trading say that HFTs can exacerbate market crashes because traders need to turn over large volumes to make enough money from the tiny price differences they seek out, reaping a small margin on each trade," reports Reuters.

HFT firms are facing greater oversight in the States and Europe as regulators, politicians and pundits express concern in HFTs' role in recent Flash Crashes and the recent wave of market volatility. European overseers are mulling whether to force traders to post orders for at least half a second, which is an eternity compared to the fractions of a second they currently hold a stock.

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