Tech

WATCH: High-Frequency Trading Explained in 60 Seconds

Is the stock market “rigged”? That’s what Michael Lewis, the author of “Flash Boys: A Wall Street Revolt,” is arguing. Lewis argues that high-speed trading gives some traders an unfair advantage. The video above explains what all the fuss is about high-speed trading.

Business Insider has a slightly more detailed breakdown of high-frequency trading. They also explain why high-speed trading is getting a bad rap. Part of BI’s argument is excerpted below:

“Taking advantage of an advantage in speed and algorithmic processing to jump in front of trades from slower market participants [creates] small, guaranteed wins millions of times a day. A high frequency of trades is required to make money.

Therein lies the problem. This is where the game is rigged.

If you know that by getting to the front of the line you are able to see or anticipate some material number of the trades that are about to happen, you are GUARANTEED to make a profit. What is the definition of a rigged market? When you are guaranteed to make a profit. In casino terms, the trader who owns the front of the line is the house. The house always wins.”

If you want to learn more about “Flash Boys,” you can buy it here.

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High Speed Trading: 5 Fast Facts You Need to Know

High-speed trading isn't new, but the practice has recently come under fire. Learn why so many experts are scared of high-speed trading.

Click here to read more

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