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Expert Quotes on HFT

"Automated trading has dramatically expanded in recent years and has brought many benefits to market participants – such as more efficient execution, lower spreads and greater transparency."

CFTC Chairman Tim Massad, Opening statement before the CFTC Technology Advisory Committee Meeting, February 23, 2016

"Compared with the speed of trading 20 years ago, anyone can trade at high frequencies today, and so, to me, this transformation is more about technology than any one particular type of firm."

Governor Jerome Powell, Federal Reserve Board of Governors, Remarks the The Brookings Institution, August 3, 2015

"High-frequency trading, which is a subset of algorithmic trading, is applied in a number of strategies by an array of firms, ranging from owner-operated start-ups to the largest hedge funds and broker-dealers. It is, quite simply, a disruptive technological innovation, which has reshaped an entire industry structure. It has exerted competitive pressure on traditional players by tightening pricing parameters and creating informational advantages.  As with any major technology disruption, there are potential benefits and risks.  The key for policymakers is to recognize that the technology is here to stay, and we need to be forward thinking about its effects on market functioning."

Antonio Weiss, Counselor to the Secretary of the Treasury, Remarks at the Brookings Institution, August 3, 2015

"The high frequency traders are an important part of the ecosystem, and we are of course broadly speaking in favor of anything that improves the quality of the trading ecosystem. I’m interested in what the Federal Reserve ideas are in how they might improve the ecosystem. We will support all sensible suggestions."

ICAP Chief Executive Officer Michael Spencer, Bloomberg News, July 15, 2015

"Numerous studies - including the recently released UK Foresight HFT project - have shown that transaction costs for both retail and institutional traders decreased substantially with the growth of high-frequency trading. The cost savings are easy to understand. Compared with human dealers, computers have considerable advantages. They have perfect attention spans, follow instructions to the letter, do not allow their emotions to cloud their judgment and they watch and learn from thousands of sources of information simultaneously. Nor do they cheat and they work for far less and require smaller offices. These advantages have greatly reduced transaction costs as many HFTs compete with each other to serve us now.”

Larry Harris, USC Marshall School of Business, former chief economist of the SEC 2002-2004, Financial Times, December 27, 2012

“High-frequency traders provide a vital service to all market participants…HFT helps to create efficient markets by facilitating price formation, lowering the cost of trading and improving the linkage between markets. All of this, in turn, aids in achieving optimal investment performance for end investors.

Blackrock ViewPoint, Equity Market Trading in Europe, June 2011

“Academic literature, however, has praised electronic trading for making the markets more efficient, especially for retail investors. While the efficiency created by fragmentation may make it more challenging for large asset managers to acquire blocks of stock, for individuals buying hundreds or even thousands of shares, electronic trading has made investing more democratic, transparent, faster and much less expensive.”

"While Vanguard does not engage in this type of trading, we recognize that such trading has a positive impact on the markets at large, including longer term investors. Such arbitrage trading enables investors to get a fair price across market centers. Vanguard believes that the market structure changes facilitated by the Commission's various regulatory initiatives and the "knitting" together of the marketplace by "high frequency trading," have led to a significant decline in transaction costs for long-term investors over the past ten years through increased liquidity and tighter bid-ask spreads.”

“HFT has become a matter of controversy because of a false meme that has spread through the media. The false meme alleges that HFT traders get an unfair advance look at the orders of mutual funds and other investors. That just isn't true. Institutional investors are extremely concerned about information leakage from their orders. In the current competitive environment, no exchange or ATS would stay in business if it leaked information about pending orders without the permission of the people placing those orders.”

“Due to the rise of high-frequency trading, investors both large and small enjoy a deeper pool of potential buyers and sellers, and a wider variety of ways to execute trades…investors now enjoy faster, more reliable execution technology and lower execution fees than ever before. All of that contributes significantly to market liquidity, a critical measure of market health and something all investors value.”

“The stock market and the nature of investing constantly evolve with technology. In many ways technology has made finance more democratic from wider, cheaper, better-diversified stock ownership while speculation has gotten more cut-throat and competitive. The market allows for both of these investors [HFT traders and small investors] to coexist.”

“Floor traders had a speed advantage over customers off the floor who were trading by limit order. When market-moving news came out, floor traders…Could exploit their speed advantage, and trade against stale customer limit orders that were entered before the information was released. In so doing, the locals, due to their time-and-space advantage, took money from customers…. And what ticks off old-timers…Is that the easy pickings aren't there for the taking anymore. HFT traders, through their tremendous speed, and their ability to scrape numerous sources of electronic information, can pull their quotes in an instant when market-moving news comes out. They thereby protect themselves from being picked off.

“Keep this in mind when you hear laments about HFT, especially from market veterans. It's all about whose gnu is gored, or about how the gnus have become so fast that it's hard to gore them anymore.”

“Bid-ask spreads have definitely come down over the course of the last five years, order books have got[ten] somewhat shallower and overall our transaction costs have not increased. If anything they have continued to decrease, but we have had to adapt our processes to access the liquidity.”

“HFT provides many clear benefits, such as more market liquidity and generally lower transaction costs for participants. Speed by itself is not bad. Regulators and the industry need to tackle more appropriately market manipulation, which may happen in low-frequency as well as high-frequency trading environments.”

“Despite commonly held negative perceptions, the available evidence indicates that high-frequency trading and algorithmic trading may have several beneficial effects on markets.”

“Overall, HFT enhances market liquidity, reduces trading costs, and makes stock prices more efficient. Increased liquidity lowers the cost of equity capital for firms. In addition, the lower costs of automation can be passed on to investors in the form of narrower bid-ask spreads and smaller commissions….With a lower cost of capital, firms are likely to invest more, with commensurate increases in GDP. And share prices are almost surely higher as a result of this reduction in trading costs, benefitting long-term investors.”

“We certainly don't want [regulations] to go too far. If regulations are too restrictive they can unintentionally limit the use of market practices, all the new innovative tools that funds are using. So we don't want that to happen. If they're too costly, well, who's going to pay for it?"

“According to proprietary Eurex Exchange market data analyses as well as a number of third-party studies, high-frequency trading (HFT) is an important component of electronic markets. HFT participants provide liquidity to markets, dampen volatility and reduce total transaction costs.”

“Technological advances accompanying automated, electronic markets have brought numerous benefits to investors of all types. These benefits – described in the presentation – include the following: lower volatility; increased liquidity; reduced transaction costs; smaller bid / ask spreads; improved price discovery; and enhanced risk management.”

Managed Funds Association presentation on electronic trading, April 2013





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