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Posts Tagged ‘market action may 6th 2010’

What We Learned from the May 6th Market Plunge

Posted by Larry Doyle on May 11th, 2010 7:55 AM |

Like leading sheep to the wolves, the manner in which high frequency trading activity has grown to dominate our equity markets is nothing more than a trap. How has that trap worked? Stay on message and continue to promote the premise that high frequency trading adds liquidity to the market. Time and time again, America would hear from quantitative traders and their analysts engaged in high frequency trading that these programs would provide consistent liquidity from which retail investors would benefit.

What a crock!! That said, the HFT activity itself is not to blame for the market plunge. The programs behaved as they were designed. That is, during periods of extreme volatility, those running the programs would simply shut down the machine. Is that liquidity? No, I don’t think so.

Never again should America have to listen to anybody engaged in high frequency trading and hear them say these systems provide liquidity to the market. They don’t. (more…)






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