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Mutual fund execs talk high-frequency trading

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The Washington Post, ever influential in lobbying and regulatory circles, has weighed in with a general look at high-frequency trading through the eyes of two mutual fund executives, one who is comfortable with the practice and one who is not.

The arguments are old by now. A Vanguard employee notes the benefits of high-frequency trading, notably the added liquidity and the decline in transaction costs that benefit a wide swath of the market, including retail investors. A T. Rowe Price representative notes some of the negatives, such as the fact that the liquidity often amounts to flickering quotes, the incessant quote-gaming, the sniffers and so on. The article doesn't get into the maker-taker traders and whether that represents a pro or a con.

When you boil it down for regulators, the fact is that both views are right. There are enough variants of high-frequency trading that we get some true benefits and some ill effects. The regulators will have to think this through with an eye on a market structure that preserves the benefit and moderates the downsides, which will not be easy.

Of course, one might argue here that the urgency of the issue may have receded just as bit, as the once awesome growth trajectory of high-frequency trading has moderated and seems to have plateau-ed in terms of its share of all trading. More than a few of these firms are ailing right now, with no real change in sight.

For more:
- here's the article

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