There has been lots of discussion about high frequency trading recently. First, a survey put on by the Federal Reserve of Chicago among actual financial firms that found risks and problems prevalent. And second, news that a Senate panel was looking into high-frequency trading for potential regulations.
Well today Mark Cuban wrote a great post laying it down further on high frequency trading:
There is value to trading automation. It is here to stay. There is absolutely NO VALUE to High Frequency Trading. None. We need to bring our markets back to their original goals of creating capital for business. It’s impossible to guess how many small to medium size companies have been held back from growing and creating jobs and wealth because of lack of access to capital from the stock market. It’s not impossible to know that our economy has suffered because Wall Street equity markets are no longer a source of equity for helping companies grow, it is not a platform for hackers and that needs to change. Quickly.
I 100% agree. This is my biggest problem with Wall Street today.
I especially like his idea of a small tax (say $0.10) on every trade held less than an hour, or 30 mins, or 10 mins, or whatever it may be. These traders are getting pennies or fractions of pennies for every trade (which of course adds up) so stands to reason that a $0.10 tax would be enough to stop them from happening.