Quartz: 96.8% of trades placed in the US stock market are cancelled

That number is shocking to me.  I for one think high frequency trading is a perversion of our capital markets.  People will argue that it provides liquidity but at what cost?  Read the full article over at Quartz.

“Although the SEC isn’t saying as much, experts think it’s a sign that high-frequency trading are flooding the market with orders, overwhelming the average retail or institutional investor.”

“High frequency trading firms have been known to flood the market with orders, trying to determine the price institutional or retail investors are offering, then cancel 90% of them a split-second later. This can artificially alter the price of a security, netting high-frequency traders profits at the expense of their counterparties. True, those profits are small—often just pennies. But over time, these firms make millions of dollars.”

I like Charle Schwab’s and Walt Bettinger’s solution:

“A penalty on excessive cancellations, rigorous enforcement of rules regarding information access, and a top-to-bottom study of the NYSE’s 40-year-old Market Data System would be good places to start,”

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