NYTimes: The Wolf Hunters of Wall Street
This is really fascinating. High frequency trading may have benefits to the market and investors, I don’t know enough about it, but certainly the motivation to profit from basically frontrunning trades made by “slow” traders (basically everyone else) is clear. And it seems that huge profits have been made by HFT shops, large banks with dark pools and exchanges themselves by selling the tech and access to enable this strategy. But I would like to talk to friends who are in this world to ask them what they think.
An interesting aspect to this is that it has the quality of a great crime in that the perpetrators profit while the victims have no idea that they are damaged. And in fact, the amount that any one victim is harmed may be somewhat small (thinking here of individual investors, not for example T Rowe), because only fractions of pennies per share might be the difference in price paid as a result of this. So the damage is really diffuse, hard to actually quantify, and so hard to get personal about.