Yesterday was a historically spectacular day on Wall Street … DJIA down 1,000 on the open, rebound by about 750 points, back down by 750.
Geez, was the world’s economic structure changing that much hour-to-hour?
Was new economic information flowing in at warp speed?
Sure, there was a deepening understanding that the market is over-valued and that China’s economy is in trouble.
That explains a big correction, but what about the hour to hour volatility?
A partial answer to the volatility question was captured in a WSJ headline:
Historic Profits for High-Frequency Trading Firm
‘Our firm is made for this kind of market,’ Virtu Financial CEO says”
Virtu Financial Inc., one of the world’s largest high-frequency trading firms, was on track to have one of its biggest and most profitable days in history Monday amid a tumultuous 24 hours for world markets.
“Our firm is made for this kind of market” .
Virtu and other such trading firms, along with exchanges, emerged as early beneficiaries of the heightened volatility and volume caused by investor unease over China’s economy and a growing belief that the U.S. Federal Reserve might not raise interest rates at its meeting next month.
“These are the kinds of days that everyone here is working for.
“It’s probably our best day since” the 2010 flash crash,.”
“The very best conditions for [high-frequency trading firms] is when markets are going up and down with high volume.”
Exchanges … also benefit from the increased trading [since higher transactions fees are generated].
I’m a free market capitalist, but even I have to ask the question …
What value do these high frequency traders add … really?
Transactions costs are so low and computers are so fast that the high freq traders reap huge profits by, in effect, fanning the flames of temporarily unstable markets.
Gotta ask: Is that a good thing?
Thanks to SMH for feeding the lead