ALGORITHMIC TRADING FX
High Frequency Trading and Market Stability
Te news is filled with comments about automated trading and ‘high frequency’ trading, blaming either directly or implicitly, that it was these computer systems that caused or exaggerated the crash. In a Fortune/CNN article: “We want to see a big reaction in Washington,” said Saluzzi. “We need to get all these fast-trading jokers out of here.” Are they suggesting we stop using algorithmic trading systems, used by nearly every type of investment fund,
including Mutual Funds, Hedge Funds, Banks, and retail brokers?
Exchanges have moved to fully electronic trading, as have funds - not only for execution but for decision making. Anyone who suggests that automated traders should be banned represents a dying class of angry workers similar to the Luddites, a social movement in pre-industrial Britain against the development of automated looms.
Te Luddites were a social movement of British textile artisans in the nineteenth century who protested - often by destroying mechanized looms - against the changes produced by the Industrial Revolution, which they felt were leaving them without work and changing their entire way of life. Tis English historical movement should be seen in the context of the era’s harsh economic climate due to the Napoleonic Wars, and the degrading working conditions in the new textile factories. Since
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