This Sunday, 60 Minutes turns its eye to HFT’s impact on Wall Street.
“New Jersey stock trader Manoj Narang says his firm has never had a losing week because his super computers are fast enough to capitalize on split-second opportunities in the market. Narang and other traders are using a legal but controversial technique called “high-frequency trading.”
It played a role in a 15-minute, 600-point market meltdown last spring now known as the “Mini Market Crash.” Correspondent Steve Kroft talks to Narang in a rare chance to see such a business up close. He also speaks to SEC Chair Mary Schapiro – who has high frequency trading in her regulatory sights – and others for a “60 Minutes” report to be broadcast Sunday, Oct. 10, at 7 p.m. ET/PT.
High frequency traders rely on mathematicians and computer experts to write electronic trading programs and they use expensive computers to run them. Many of the country’s large financial institutions do high frequency trading and it is estimated that from 50 to 70 percent of all U.S. stock trades are made this way. Humans are becoming less involved.
But computers can create turmoil in the market, and the results can be devastating. The market crash last May 6 was triggered by one computer algorithm that sold $4.1 billion of securities in a 20-minute period. The high-frequency trading programs’ response to that – buying many of them up and selling them just as fast – exacerbated an already bad situation.
Full article at link.
How Speed Traders Are Changing Wall Street
CBS, Oct. 7, 2010