Free Newsletters - Space - Defense - Environment - Energy - Solar - Nuclear
..
. Earth Science News .




POLITICAL ECONOMY
High-frequency stock trade risky, unfair: experts
by Staff Writers
Washington (AFP) Sept 21, 2012


The increasing power of computerized high-frequency trades on US markets has been assailed in Congress as dangerous and unfair, as pressure builds to reel in the powerful industry.

Brokers and industry experts told a congressional panel Thursday that the flash crash of May 6, 2010, the computer glitch that sabotaged Facebook's IPO last May, and the Knight Capital software problem that dealt the company a $440 million loss in August, were all examples of the potential for disaster from ultra high-speed, high-frequency trading (HFY).

"US equity markets are in dire straits. We are truly in a crisis," said David Lauer, a former trader and currently a consultant on markets and high frequency trading at Better Markets Inc.

"While complex systems can often provide elegant solutions to intractable real-world problems, they can also spin out of control in unexpected ways," he told the Senate Committee on Banking.

High-frequency trading now accounts for 50-70 percent of the volume on markets each day. It has turned most share purchases into acts lasting a second or less, rather than investments that can span days, months and years.

But it simultaneously works in "dark pool" trading operations away from regulated markets, with computers able to work at hyper-speed to exploit price anomalies and take advantage of buyers and sellers trading in traditional ways.

Lauer cited the flash crash of May 2010, when in just minutes the market plunged, losing $1 trillion in value, then just as quickly recovered.

In the interim, though, he said, all liquidity in the market "simply disappeared" as computerized traders pulled out.

"Nobody had ever seen anything like it... When more than half of the liquidity in the stock market is able to be pulled from it in a matter of seconds, dramatically worsening an unstable situation, something is dreadfully wrong."

Lauer said the problem is far more common than the most publicized incidents suggest.

"'Mini flash crashes' occur on a near-daily basis in individual stocks," he said.

The effect is that traditional retail investors have pulled out, frightened by the volatility brought by HFT and the perception of unfair pricing.

"The flight of the retail investor during a period of incredible stock market returns is a sure sign that this exodus is a result of mistrust rather than economic conditions."

Andrew Brooks of brokerage T. Rowe Price told senators "the almost myopic quest for speed has threatened the very market itself."

"There is a growing distrust of the casino-like environment that the marketplace has developed over the past decade. We worry that the erosion of investor confidence can undermine our capital markets, which are so important to the economy."

He said the existence of 13 different exchanges and over 50 dark pools that large traders can use, and obtain faster information on prices than others, "has produced a market that values speed over fair access."

"In no other regulated industry is one party allowed a head start in exchange for payment."

Larry Tabb, chief executive of market consultant the Tabb group, said its poll of market professionals shows that the flash crash and Knight problem have driven confidence in the markets sharply lower.

But he cautioned against over-regulating.

"I am not sure that there is a direct correlation between this drop in confidence and the long-term trend of decreasing equity ownership," he told the Senate panel.

"We need to be careful not to over-regulate our markets. The unintended consequences may be tremendous. That said, liability and responsibility are important to the marketplace and should not be vacated."

.


Related Links
The Economy






Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks
del.icio.usdel.icio.us DiggDigg RedditReddit GoogleGoogle




Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News





POLITICAL ECONOMY
China vows ongoing support to resolve euro crisis
Brussels (AFP) Sept 20, 2012
China pledged continued assistance Thursday to help tackle the eurozone debt crisis, saying Europe was "on the right track" but needed to implement the measures agreed to fix its problems. Premier Wen Jiabao told EU and Chinese business leaders that Beijing had continued purchases of European government bonds in recent months and discussed cooperation with the new eurozone rescue fund, the E ... read more


POLITICAL ECONOMY
EU offers Italy 670 mn euros in quake aid

Norway supplies $168M for famine relief

Haunting 'Land of Hope' part shot on location in Fukushima

Japan slams brakes on $63 billion in spending

POLITICAL ECONOMY
iPhone 5 rollout draws big crowds worldwide

Using a laser to 'see' the smallest world

YouTube seeking education video 'gurus'

Angling for gold

POLITICAL ECONOMY
The "slippery slope to slime": Overgrown algae causing coral reef declines

Sea Surface Temperatures Reach Record Highs on Northeast Continental Shelf

CO2 from water pollution, as well as air pollution, may adversely impact oceans

One dead at Peru gold mine protest over scarce water

POLITICAL ECONOMY
'Planetary emergency' due to Arctic melt, experts warn

Warming ocean could start big shift of Antarctic ice

Arctic Sea Ice Hits Smallest Extent In Satellite Era

Alpine glaciers contribute to carbon cycling

POLITICAL ECONOMY
EU seeks to clarify honey

Selective grazing and aversion to olive and grape leaves achieved in goats and sheep

Researchers propose new way to save Africa's beleaguered soils

Evolutionary straitjacket means flies can't take the heat

POLITICAL ECONOMY
CU mathematicians show how shallow water may help explain tsunami power

Powerful Typhoon Sanba pounds South Korea

Nicaragua ups volcano response as San Cristobal rumbles

India landslide death toll jumps to 45: minister

POLITICAL ECONOMY
Endless Congo war flares anew amid mutiny

Food supplements have little effect on the weight of malnourished children

Moroccan ex-POWs from W. Sahara conflict hold sit-in

No peace of mind for war-weary South Sudanese

POLITICAL ECONOMY
Genetic mutation may have allowed early humans to migrate throughout Africa

Ancient tooth may provide evidence of early human dentistry

People change moral position without even realizing it

Seeing fewer older people in the street may lead low-income adults to fast-track their lives




The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement