Thursday, January 5, 2012

High Frequency Trading Aids Mutual Funds

While high-frequency trading benefits most traders, there are some hazards involved. The presumption is that high-frequency traders are more efficient, at the expense of the less adept. Individuals who feel they cannot compete with mutual funds or other large investors, view the subject negatively.

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 should 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. (See the Earl J Weinreb NewsHole® comments.)

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