HFT, which accounts for two-thirds to three-quarters of all Wall Street volume, seems to have led to smaller spreads (the gap between bid and offer prices).
But as Andrew Haldane of the Bank of England pointed out in a speech last month, HFT firms may be benefiting at the expense of other investors.
Instead of being better informed about a company, HFT outfits are simply seeing and acting on market prices sooner than competitors. ”
The problem may be that, unlike market-makers, HFT investors have no obligation to trade in difficult conditions. ”
Although the market righted itself quickly, regulators are debating ways to step in when prices go haywire.
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