My attention has recently been drawn to an academic research paper entitled High Frequency Trading and The New-Market Makers. The author, who is from the VU University in Amsterdam, investigates the connection between high frequency trading and the emergence of new exchanges here in Europe:
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Last Friday the U.S. Securities and Exchange Commission charged the investment bank Goldman Sachs and their London based Vice President Fabrice Tourre with fraud:
The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.
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The BBC reports this morning that Lord Myners, the UK "City minister" and former head of fund manager Gartmore, has his doubts about the development of high-frequency trading (or HFT for short). He told the BBC that:
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