I am trying to make sense of some statements in today's NY Times on this. The
article appears at
"Profits from high-speed trading in American stocks are on track to be, at most,
$1.25 billion this year, down 35 percent from last year and 74 percent lower
than the peak of about $4.9 billion in 2009, according to estimates from the
brokerage firm Rosenblatt Securities. By comparison, Wells Fargo and JPMorgan
Chase each earned more in the last quarter than the high-speed trading industry
will earn this year."
"The firms also are accounting for a declining percentage of a shrinking pool of
stock trading, from 61 percent three years ago to 51 percent now, according to
the Tabb Group, a data firm."
Elsewhere on the NY Times site is this definition:
"Trading mostly with their owners? money, [high speed traders] scoop up hundreds
or thousands of shares in one transaction, only to offload them less than a
second later before buying more. They can move millions of shares around in
minutes, earning a tenth of a penny off each share."
But don't they often lose a tenth of a penny per share, too?
All I can think is that (1) 51% represents an amazing amount of gamblers moving
in and out of stocks; and (2) isn't the approach these firms use simply
"momentum investing"? There may be a net profit this year but I would think
there is a net loss in other years. When a net profit occurs, it is luck.
Should a buy-and-holder who looks at a stock's fundamentals (and certainly not
nanosecond-by-nanosecond momentum) care about high speed traders?
I am not worried, but I am intrigued by all the commenters who say this
"technique" of trading stocks needs government regulation.
- posted 7 years ago