Anthony Hilton: It's time to investigate how fair fast markets are

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A few years ago the big fund management groups accounted for the bulk of the trading on stock exchanges. Then, on the back of ever-faster computers and communications, the high-frequency traders arrived.

Buying and selling shares in millionths of a second, they seek to take advantage of the most minute price differentials long before conventional traders even know they exist.

It may not be what stock exchanges were designed for, but it is what they have become. 

This week Anne Richards, chief investment officer of Aberdeen Asset Management publicly questioned whether this development was in the client’s interest and whether the system was even fair.

She pointed out that conventional traders have good days and bad days but some of the high-frequency houses in the United States never seem to lose money.

Life in the market is not normally so benevolent, so she raised the question of whether something in the system gives these players an advantage which other participants don’t have.

Dick Grasso — a former chairman of the New York Stock Exchange — seemed to agree. “A fast market is not necessarily a fair market,” he opined.

These concerns were focused on the United States, but market practice in the UK is not that different these days.

If there are worries about what is happening over there, are there similar concerns and similar potential abuses over here?

At the very least, should there not be a bit more digging by the regulators to find out?

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September 16, 2015 |
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