How is it that we’ve let the stock market become so dominated by high speed computerized trading (HST)? Accounting for perhaps 70% of trades, these STSers form a snake of densely packed trading systems (bunched up as close as posible to certain exchange offices) have a huge advantage over the rest of us. The radical volatility we are seeing, removing stock prices further and further from anything remotely like their true valuation, puts the few HST insiders at an unfair advantage. Buying and selling stocks thousands of times a second, based on mathematical and statistical formulas, these streams of HSTers maximize the speed of trading to something close to the speed of light. (And if they find the new tachyon, you can bet these guys will exploit them to make money predicting yesterday's prices.) Capitalizing on information about intended and realized trades seconds before everyone outside the HST loop, these insiders place and cancel orders in fractions of a second, accumulating huge profits while ordinary traders are left holding the bag, staring out in dismay at radical swings in the prices of even well-valued stocks!
The SEC cannot keep up with them, nor prevent the next flash crash. No wonder some argue the entire practice should be banned. Since they clearly have a huge advantage, what about a small (penny?) tax on their trades? That might help restore some confidence in the stock market that has been diminishing over the past few years. Any of the Wall Street Occupiers listening?
