Those who defend high frequency trading say such trading improves market liquidity, It assures a buyer or seller availability whenever one wants to trade.
High frequency trading benefits mutual fund investors and traders in that it reduces costs. It lets investors with fast computers take advantage of small price discrepancies and brings market liquidity.
In the past, the stock market was efficiently operated by middle men or “market-makers.” They normally completed sales by buying and selling in their own accounts, if they could not immediately match buyers and sellers. Market makers profited on the difference between the bid prices buyers were willing to pay and the ask prices sellers accepted.
The SEC is tightening its controls of high frequency trading which it’s currently suspicious of, but it will further study the matter.
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