Streams

Episode #22

What Does High-Frequency Trading Mean For Your Average Investor?

« previous episode | next episode »

Friday, September 21, 2012

In Olympic track and field, a tenth of a second can mean the difference between the gold and the silver. But on Wall Street, mere milliseconds separate the winners from the losers as a result of a technological advance that has fundamentally changed how the market operates.

So-called "high-frequency traders" use algorithms to make tens of thousands of trades a day. They may only earn a fraction of a cent on each trade, but the high volume means they can earn millions.

Recent snafus have raised concerns that this newfangled, computer-based trading is risky.

In August, brokerage Knight Capital lost $440 million in 45 minutes when its new trading software malfunctioned shortly after the market opened, and just this week there was a brief plunge in oil prices pegged to high-frequency trading.

Slip-ups like these prompted the Senate Banking Committee to hold a hearing Thursday into whether the practice is hurting investors and whether it needs to be regulated.

This week on WNYC's Money Talking, contributors Joe Nocera of The New York Times and Rana Foroohar of Time explain what this means for the average investor and what it says about the purpose of the market.

Hosted by:

Jeff Greenfield

Contributors:

Rana Foroohar and Joe Nocera
News, weather, Radiolab, Brian Lehrer and more.
Get the best of WNYC in your inbox, every morning.

Leave a Comment

Register for your own account so you can vote on comments, save your favorites, and more. Learn more.
Please stay on topic, be civil, and be brief.
Email addresses are never displayed, but they are required to confirm your comments. Names are displayed with all comments. We reserve the right to edit any comments posted on this site. Please read the Comment Guidelines before posting. By leaving a comment, you agree to New York Public Radio's Privacy Policy and Terms Of Use.