July 25, 2009

This is how they do it

One opaque practice replaces another in the share market.

It didn't take long.

It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

In theory, the free market operates toward a happy little equilibrium because everyone has the identical and complete information upon which to make their rational economic decisions.

It ain't so.

Now it's even worse.

Stock traders find speed pays, in milliseconds

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