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High-Speed Firms Now Oversee Almost All Stocks At NYSE Floor (bloomberg.com)
An anonymous reader writes: Barclays, one of the biggest banking and financial services firms in the world, has sold its business on the floor of the New York Stock Exchange to Global Trading Systems. This is significant because it marks a transition between human-based trading and high-speed trading. Now, humans on the NYSE floor have more of a supervisory role, making sure the automated systems don't go haywire. Barclays has been around for hundreds of years; GTS was founded in 2006. "There used to be dozens of specialist firms, as designated market makers were once known, at the NYSE floor. But profits from trading U.S. stocks dwindled, making it difficult to serve as market makers without automation. Although GTS, Virtu, IMC and KCG employ human traders at the floor, their businesses are driven by some of the industry's most sophisticated computer systems."
If computers do trade stocks, isn't that than the same as computers which go to war?
Predictions about future returns are part of "the value of something right now", so your distinction makes no sense.
No, it doesn't. It introduces delays and dependencies on the future, but people make both kinds of errors on stocks.
In fact, the opposite is true mathematically: longer delays tend to produce bigger swings, for the simple reason that a system can go off the rails longer before the market corrects it.
But there's an even more basic error in your reasoning, namely the assumption that market swings are bad or that we should adopt policies to reduce them.
The faster the trading, the worse the swings will get.
The SEC's investigation into the 2010 Flash Crash, came to the exact opposite conclusion: that HFTs have a stabilizing influence on markets by providing liquidity. One of the reasons for the crash was that when prices moved outside of the expected range, many HFTers stopped trading, and the resulting drop in liquidity, and rise in spreads, caused some investors to panic.
Your trades as an Etrade customer are not at all executed as "HFT" in any way that gives any meaning. You don't have access to anything close to the speed and price information that real HFT actors have.
But we haven't had a capital constrained economy for almost two decades now.
More like four and a half... However, normal society is still capital constrained, by the financial industry through usury. All that money is flowing overhead and we get what leaks through the pipe.
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