Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

High-Frequency Trading: It's Worse Than You Thought

High-frequency trading, which already has a sullied reputation, is even worse than the critics have charged, a new survey shows.

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The Federal Reserve of Chicagorecently asked 30 firms associated with the industry — traders, exchanges, vendors and others — to evaluate where HFT stands in the wake of a series of high-profile blowups.

While the central bank's analysts knew there were issues, what they found exceeded their expectations.

Industry pros reported a rash of out-of-control computer algorithms that power the HFT platforms. They admitted that speed is more important than safety. And they even went so far as to say that they actually wish the industry was more regulated but want the rules to be applied equally, something that may not be happening today.

"Market participants at every level of the trade life cycle reported they are looking to regulators to establish best practices in risk management and to monitor compliance with those practices," Carol Clark, senior policy specialist at the Chicago Fed, wrote in a summary of the survey's findings.