Quote:
Originally Posted by wind_magic
....by the rules of the exchanges there are market makers who post a bid/ask spread, and they have to accept trades, most of that is done by computer and it does result in an incredible number of trades.
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No windy. Market analysts estimate that upwards of 70% of equity trading these days is driven by high frequency traders who represent just 2% of market participants. They buy and sell
equities and attempt to collect
liquidity rebates from the exchanges.They trade for no apparent reason and are apparently in partnership with the exchanges they trade on.
Is Uncle Sam Manipulating the Equity Markets? | Sense on Cents
(the 4:20 mark)
On the week ending June 19, Goldman Sachs was ranked first on the NYSE program trading list. But on the week of June 22, Goldman mysteriously didn’t appear on the list of the top 15 firms at all. It simply vanished without any explanation. Then the NYSE announced it would change some of the data for calculating the trading report. The Zerohedge blog was all over this controversy a week ago.
ZeroHedge uncovered that program trading accounted for 49% of all NYSE trading in June, and Goldman Sachs represented about 60% of all principal program trading. this was widely reported all over internet trading blogs.
I think this comment by Andrew M. Brooks states the problem best. He's head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. and I quote...
“But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”
He has a point as the way I understand the market, when someone makes money on a stock, some other person is losing money. If Goldman Sachs machines are making $ billions per day, just who are the losers in their trades?
High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. This is a loophole in market rules which gives high-speed investors an early glance at how others are trading. Their computers can then essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there. Also there have been rumors of front running, which as you know is a felony.
Main St. America is the loser. If people can no longer make money in the market, will they continue to invest in it?