I’m fascinated at the degree of hatred for high frequency trading [HFT] among my fellow portfolio managers, particularly those that live in the Baltimore area. I have my own techniques for dealing with them: discretionary reserve orders, and not trading much. If you are a longer-term investor, the games that exist in buying and selling in the short-run don’t matter much. In my opinion, HFT milks short-term traders the most.
But I have my own solution to high frequency trading: revamp all markets such that there is one auction per second in the trading day. Auctions happen at the top of each second: 9:30:00.000000… 9:30:01.000000… … 16:00:00.000000. Additionally, orders still standing at the start of any second may not be cancelled for the next second.
Auctions once per second. Click, click, click, click… 23,401 auctions per day offers more than enough flexibility to buyers and sellers. No truly economic commerce would be hindered by such an arrangement.
Why would anyone argue with this? It splits the difference, and brings order to markets where many are presently skeptical of the validity of the markets.
I’m open to other ideas here. I toss this out as a way of making markets more transparent. Transparency aids validity, which aids legitimacy, eventually.