High Frequency Trading
There has been alot of talk over the past few weeks about high frequency trading. We have argued that the volume these high frequency traders are creating is not beneficial to the market. Lets take a closer look at what a high frequency favorite stock looks like. The poster boy for HFT this week is none other than 80% U.S. government owned, AIG. AIG recently underwent a 1 for 20 reverse split since the “issuer” wanted to make their stock look more attractive to institutional clients. You would have expected volume in this stock to be reduced by 20x. Instead, volume has remained at a consistent pre split level of 75 million shares/day. How could this be? Did something change to attract more institutional buyers? Did the black hole of AIG liabilities somehow close? No, the answer here is that the High Frequency traders found a new stock to play in.
Joe Saluzzi of Themis Trading has put together a great synopsis of a High Frequency Trading roundtable held today, called, in traditional HFT egomaniacal fashion, “High Frequency Trading: The New World Order.” Useful insight for many, who have been increasingly inquiring about the topic on Zero Hedge. Joe's conclusions is worth highlighting: