This is the second part of my discussion on high-frequency trading that exclusively concerned mutual fund managers.
While I feel high-frequency trading benefits most market participants, there are hazards involved. In every trade. There may be a winner and a loser. The presumption is that high-frequency traders are the more efficient, at the expense of the less adept. What can happen to individuals who feel they cannot compete with mutual funds or other large investors, for example?
If profits are made on tiny price variations, unscrupulous players can profit in some manipulation, like that caused by rumors. However, the SEC has the ability to supervise this possibility.
The SEC must always protect small investors from active traders who could conceivably be hurt by high-frequency trading with their faster computers. At the same time, high-frequency trading benefits small investors who use mutual funds, as an example.
That is why I feel there is no problem that some may have envisioned.
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