3
How high-frequency trading works
A woman walks past Goldman Sachs headquarters
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Steve Chiotakis: Later this morning Goldman Sachs is expected to release a big profit report. Even while other big banks are still struggling. One reason Goldman is succeeding so mightily is its emphasis on something called high-frequency trading. Jill Barshay reports.
Jill Barshay: In the old days, traders hit a computer key to buy or sell stocks.
Sang Lee is the managing partner of the Aite Group. He says that's old school.
Sang Lee: By the time I push a button to trade, it's not inconceivable that a machine could have already sent, you know, 2,000 orders out there.
There are two parts to high-frequency trading: the PhDs who write trading programs and the high speed computers that execute the trades. The faster your computer, the quicker you can get to a buyer or a seller, and the more money you make.
Lee says these computers dominate stock market activity and play a vital part.
Lee: Machine driven trading has literally become some defacto liquidity provider in the marketplace. Which is a very important role to have.
High-frequency trading may make the market more efficient, but it's not necessarily fair. If you can't afford a team of PhDs and the most up-to-date computers, you may find giants like Goldman Sachs beating you at almost every trade.
In New York, I'm Jill Barshay for Marketplace.
<p><strong>Ahan! great post and yeah i know limousines do have great luxury , Employ limos for celebration purposes is a known trend. Celebration people love to hang in a limo with expensive friends. We are providing limousine services in Chicago please do visit our website for more detail:</strong></p></strong></p>
Capital markets are unstable. In the past there was no way to make them stable. But today we have computer power that can be used to make them stable.
By using the greater computer power of today we can have a much higher turn over of capital in the capital market. This higher turnover will make the market harder to game or control and the market will no longer have the unstable run ups or declines. Who can change or control the market when say 20% of the capital is trading each day?
So now that we have the compute power to provide for all these transactions that will smooth out the market how do we force people to turn over at a rate of 20% a day? Easy, put a cap gains tax of 0% (zero) on all gains of 7 days or less and put a cap gains tax of 90% of all gains of more than 7 days.
The likes of Yahoo, Micosoft and/or Sun Micro Systems will give us the systems that will provide automated software agents to support turning over one's investments every 7 days (based on the specs you give the agent).
A system like this will make the financial markets work as smoothly as the local fruit market.
