Comment Text:
I am a small independent investor and trader. I have been trading futures, options and equities for more than 12 years. I currently predominately trade the S&P emini futures.
Without a doubt high frequency trading has vastly inhibited my ability to generate an income from trading. I believe that HFT should be absolutely banned.
Basis for banning HFT:
1. HFT is available only to a small and very well funded group of speculators. This includes banks and hedge funds that already have a substantial advantage over the public because of their direct and indirect access to nearly limitless funds for proprietary trading.
2. HFT is nothing more than a technological method of front running orders that leaves all other participants behind. Participants normally anticipate or react to economic reports and news items. HFT can quickly insert thousands of orders in front of other participants generating huge price movement in milliseconds and eliminate the other participants from the market.
3. HFT is now estimated to be 85% of the daily trading volume. (Morgan Stanley study). Worse yet, HFT is close to 95% of the volume minutes before and after economic news and headlines.
4. HFT provides no real value to the public. In effect it is similar to hyper-fast blackjack card counting that is banned from the casinos.
5. HFT inhibits participants for getting orders executed at a fair price. For example today June 27, 2012 at 9:20:19 EDT the HFT computers entered the S&P emini market at 1315 with thousands of buy orders driving the price to 1320 at 9:30:54 EDT. That drove the market opening up more than 50 points in just 54 seconds. Human participants were shut out. Worse yet, the HFT computers were both buying and selling inside this 5 point range with thousands of orders per second so that within a one-minute chart bar it was impossible to ascertain the true price direction.
6. HFT computers are directly wired to high speed news feeds and have artificial intelligence programs to interpret the news into buy or sell orders. This happens in nanoseconds and allows the HFT trades to be inserted before humans can even read the headlines.
Summary: If you want to completely eliminate the already dwindling public participation in the markets, allow HFT. If you want the public to have a fair chance in the markets HFT must be completely banned.
