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What Others Say

Prominent Market Participants Extoll the Benefits of HFT

The largest mutual fund in the U.S said: “(HFT is) working to tighten spreads and enhance liquidity … (investors) benefit by getting lower transaction costs. That results in hundreds of millions of dollars a year in savings to investors in our funds.”
Gus Sauter, Retired Chief Investment Officer, Vanguard Group

“Main Street is the great beneficiary … We are better off with high-frequency trading than we are without it.”
– Jack Bogle, Vanguard founder, pioneer of low-cost investing

“Our study provides causal evidence for the critical importance of liquidity provision by high frequency market makers in today’s markets.”
Professors Katya Malinova, Andreas Park and Ryan Riordan

“From an institutional or buy-side perspective, today’s markets are more efficient than anytime in the past. Today’s markets are faster, they’re cheaper to trade, the typical buy-side desk has more choice due to competition in terms of execution venues, whether they’re block trading systems or dark pools, registered ATSs, and algorithms that we can customize that allow us to navigate electronic markets and obtain the best possible price for our fund shareholders.”
 Bill Baxter, Fidelity’s Head of Global Program Trading and Market Structure

“High-frequency trading in general has been good for the retail investor.”
– Fred Tomczyk, CEO, TD Ameritrade

“Based on the vast majority of the empirical work to date, HFT and automated, competing trading venues have substantially improved market liquidity and reduced trading costs for all investors.  Share prices are almost surely higher as a result of this reduction in trading costs, benefiting long-term investors.  Higher share prices also have favorable implications for firms’ cost of equity capital.  With a lower cost of capital, firms are likely to invest more, with commensurate increases in GDP and other measures of economic activity.”
Charles Jones, Columbia University professor, study analyzing 30 papers on HFT

“Researchers found that Canadian bid-ask spreads increased by 9 percent in 2012 after the government introduced fees that effectively limited HFT.
– The Atlantic magazine

We’ve come down nearly two orders of magnitude in that bid ask spread in the past 30 years. From around 0.20 percent to some 0.002 percent. That’s saved every investor huge amounts of money over all the trades they’ve done.
Forbes

“[Electronic market making] brings tangible benefits to our clients through tighter spreads”
– BlackRock Viewpoint

“How do we feel about high-frequency trading? We think it helps us.”
– Cliff Asness, Founding Principal, AQR Capital Management

“As HFT activity has grown over the past 15 years, we have observed decreases in both implicit costs and explicit costs, such as brokerage commissions.  The end result is the ability to deliver more cost-efficient investment solutions to our clients.”
Dimensional Fund Advisors

“… the increased use of electronic trading has brought many benefits, such as more efficient execution and lower spreads.
– Timothy Massad, CFTC Chairman

“By providing so many bids and offers, high frequency trading firms have narrowed pricing spreads.  Spreads for almost every financial instrument are substantially less than they were a decade ago.  For example, spreads in most US equities are half of what they were 10 years ago.”
John Servidio and Bo Harvey, McGuireWoods LLP

“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.”
– Larry Harris, USC Marshall School of Business, former chief economist of the SEC 2002-2004

“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.”
– Dominique Cerutti, Former president and deputy chief executive of NYSE Euronext

“The truth is that the markets are probably more fair and efficient than ever before and that the winners were those who followed the rules and innovated faster than the sleepy crowd who finished last and elected to pursue a scorched earth policy instead of getting back in the game and competing fairly.”
– Ian Bandeen, Founder and past CEO of the Canadian Securities Exchange

“Our paper is the first to provide an empirical assessment as to whether HFT has a positive effect on market fairness. Taken together with the existing evidence that HFT reduces transactions costs and enhances price discovery, the usual proxies for market efficiency, we demonstrate not only how market fairness can be operationalized, but how it can be used in market structure decisions.”
– York University / University of New South Wales study “High Frequency Trading and End-of-Day Price Dislocation”

“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.”
– Arthur Levitt, former SEC Chairman from 1993-2001

“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.”
– Allison Schrager, Dimensional Fund Advisors researcher

“Margins are very low, competition is very high and these high frequency traders provide liquidity and price discovery services to the market.”
– The Committee on Capital Markets Regulation

“Traditional market makers are losing their importance as automated systems have largely assumed the role of liquidity provision in markets.”
– U.S. SEC Division of Economic and Risk Analysis

“When considering the optimal industrial organization of the intermediation sector, HFT more resembles a highly competitive environment than traditional market structures.”
– Terry Hendershott, Associate Professor of Finance at the University of California, Berkeley

“Our empirical results showed that traditional measures of market quality such as execution speed, bid-ask spreads, and transactions costs all had improved dramatically over time.”
Professors James J. Angel, Lawrence E. Harris and Chester S. Spatt

“HFT helps to create efficient markets by facilitating price formation, lowering the cost of trading and improving the linkage between markets … achieving optimal investment performance for end investors.”
Blackrock ViewPoint (a series of papers on public policy)

“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.”
– Larry Tabb, CEO of the Tabb Group

“Generally speaking, high frequency traders provide liquidity and “knit” together our increasingly fragmented marketplace resulting in tighter spreads that benefit all investors.”
– Gus Sauter, Vanguard’s Retired Chief Investment Officer

“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.”
– James J. Angel, Associate Professor of Finance, Georgetown University

“…the positive overall effects of HFT on market quality are well-documented and appear by now pretty robust.”
– Evangelos Benos, the Bank of England

“Electronic trading is good for trading, good for transparency and good for regulatory compliance.”
– Marshall Bailey, Paris-based president of the ACI Financial Markets Association

Automated trading has come to play a crucial role in fostering liquidity and the efficiency of the price discovery process in inter-dealer U.S. Treasury markets.
Federal Reserve Bank of New York’s Treasury Market Practices Group

“For many markets, automated trading brings trading liquidity, broader market access, enhanced transparency and greater competition. Such features are all the more beneficial in the wake of departing bank liquidity.”
– J. Christopher Giancarlo, CFTC Commissioner

“During the (treasury market liquidity crisis in October 2014) event window, bank dealers tended to widen their bid-ask spreads (cost to trade) … At the same time, PTFs tended to reduce the quantity of orders they supplied … but maintained tight bid-ask spreads.”
– Multi-agency government report “The U.S. Treasury Market on October 15, 2014”

“Proprietary traders, be they fast or slow, provide liquidity with contrarian marketable orders, thus helping the market absorb shocks, even during crisis …”
– Toulouse School of Economics Study “Who supplies liquidity, how and when?”

“…our results indicate that HFT limit orders exert a stabilizing influence on markets.”
Professors Avanidhar Subrahmanyam and Hui Zheng

“The presence of HFT has significantly mitigated the frequency and severity of price dislocation and the likelihood of manipulation, counter to recent concerns expressed in the media that HFT exacerbates market manipulation.”
– Capital Markets Cooperative Research Centre Study “High Frequency Trading and End-of-Day Price Dislocation”

“…algorithmic trading, including HFT, enhances market quality and efficiency by increasing liquidity, lowering bid-ask spreads, facilitating price discovery and lowering the volatility of the prices for financial assets.”
Dr. Stephen Kirchner, economist, Australian Financial Markets Association

“We believe much of the public concern over “high frequency trading” is misplaced and believes such activity, appropriately examined, contributes to a more efficient market that benefits all investors.”
Gus Sauter, Vanguard’s Retired Chief Investment Officer

“High-frequency trading in general has been good for the retail investor."

FRED TOMCZYK, CEO TD Ameritrade

Bloomberg News, April 24, 2014

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