Feature

The upside of high-speed trading

Think of the market as a school of fish, pooling its resources to enable “all the fish to react quickly to any threat.”

Mark BuchananBloombergView.com

Is high-speed trading really all bad? asked Mark Buchanan. There’s no doubt that “timely information is precious,” and today’s technology allows traders and investors to “process news so quickly that they can move stock prices before exchanges even have time to calculate them.” That can cause all sorts of problems, but high-octane trading “also has its benefits.” For one, the rapid execution of trades can help synchronize prices faster, which should “be comforting news for average investors who act over much slower times and don’t have vast resources to gather and process information.” If markets don’t keep up with the speed of technology, “stock prices won’t reflect the available information, and regular investors will run a larger risk of buying or selling at the wrong price.” The high-frequency traders reap more rewards, but they simultaneously “end up helping ordinary investors make better decisions more quickly.” The truth is, speed and accuracy aren’t mutually exclusive. Instead, think of the market as a school of fish, pooling its resources to enable “all the fish to react quickly to any threat.”

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