Last Thursday, the high-frequency traders exposed themselves to the world outside of the trading community. Finally, I say. We have accepted this unfair tactic far too long. To have computers making tens-of-thousands of trades in seconds is an unfair advantage, and, as we saw, potentially damaging to all of us in the trading game. It is time to regulate this tactic, if not abolish it completely.
The world of trading is a human endeavor, and, as such, it should flow according to human intervention. Once you take the human element out of the trading equation, what remains is an emotionless manipulation of the markets that can create havoc. The word we use to describe this type of sociopathic behavior is greed, and so when a computer manipulates the markets simply in search of maximizing profit to the most miniscule degree, it raises the meaning of greed to a level heretofore unseen. Like the perpetrators of every Ponzi scheme and every trading scam ever seen, a computer does not concern itself with anything else but the profit in shaving parts of pennies from the bid/ask spread in a market. The problem is that computers blindly do this search relentlessly, and, sometimes, the search goes awry. When it does, there is little human intervention to stop the ensuing panic when the human world sees markets dropping (or rising) dramatically without reason.
In my opinion, we do not want to see the day when computers control trading. This would be disastrous, as the human element, which is the dynamic aspect to it, is essential. Imagine a trading world tightly controlled by the ultra-efficiency of computers. I can and do not the like the picture.
The good news is that this part of our world exposed itself to the point that the average person now knows, at a minimum, the potential problems associated with high frequency computer trading. He or she might not understand the concept, but he or she is smart enough to see that this is a problem. Thus, the average person can now see the necessity of incorporating this “issue” into the much needed regulation of the financial world in general.
Believe me when I tell you that I am no Pollyanna when it comes to seeing the trading world. No, I get it that a powerful current of money flows through the markets and that human forces way past my understanding manipulate that current. As a trader, I have accepted this and learned to trade within this context. But what we saw on Thursday is beyond the pale of what we have come to accept. It is clearly a case of technology in the hands of those who would act without care or consideration of anything beyond profit. And even though the goal of every trade is profit, a time comes when we must draw lines to protect everyone from those predators using these “Black Box” systems. In fact, we need to regulate the program to protect those same traders from themselves.
