As the debate about high frequency trading (HFT) continues to go on and on and as the detractors get more and more vocal, more firms are now coming out to defend the controversial practice.
According to the High Frequency Trading Review (www.highfrequencytradingreview.com), in the last few days, a number of high frequency trading firms have pitched in to the debate, arguing that the benefits that HFT brings to the market far outweigh any negative impact.
Chicago-based Wolverine Trading for example, wrote an open letter to the SEC (Securities and Exchange Commission) in response to the regulator’s call for comments in advance of a planned review of the structure of the US equities markets. In the letter, Wolverine argued the high frequency trading had brought down trading costs for retail investors, as well as offering unprecedented access to information.
Wolverine are not the only firm to jump to the defence of high-frequency trading. Similar responses have been received from market-makers Getco and the Dutch firm IMC, amongst others.
IMC made the point that all market participants, including retail and individual investors, benefit from the increased competition high frequency trading has created amongst proprietary trading firms. Citing greater liquidity and market depth, lower short-term volatility and tighter bid/ask spreads, IMC argued in their submission that investors can now trade at more favorable prices that they have ever had access to in the past.
Lending greater weight to the arguments in favor of high frequency trading, it is not just the HFT firms who are rising to the defense of the practice. Submissions have also been received from alternative exchanges like BATS, who argue that bringing about regulation in an attempt to artificially level the playing field would actually do more harm than good.
The SEC are now evaluating all the responses they have received and will no doubt decide upon a suitable course of action to take.
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