High-Frequency Traders, in Spotlight, Battle Rules

As reported by New York Times’ Graham Bowley, for years they have operated in the shadows, often far from Wall Street, trading stocks at warp speed and reaping billions while criticism rose that they were damaging markets and hurting ordinary investors.

Now high-frequency trading firms, normally secretive, are stepping into the light to buff their image with regulators, the public and other investors.

After quietly growing to account for about 60 percent of the seven billion shares that change hands daily on United States stock markets, the firms are trying to stave off the regulators who are proposing to curb their activities.

To make their case, the firms have formed their first industry trade group, hired former Securities and Exchange Commission staff members and spent nearly $2 million in the last few years on Washington lobbying and contributions to lawmakers. Some even want to be called “automated trading professionals” rather than high-frequency traders.

Critics say traders with access to the fastest machines win at the expense of ordinary investors by seizing on the best deals and turning fast profits before other traders. They also say the lightning-fast trading strategies may be making financial markets less stable because the speed and volume of trades distort prices.

The traders say they have brought greater competition to the markets and have substantially cut trading fees for even the smallest investors.

“Central to our view is that our role and other firms’ role in the market is very constructive and very beneficial to investors,” said Richard Gorelick, chief executive of RGM Advisors, a high-frequency trading firm based in Austin, Tex., and one of the companies assuming a higher public profile.

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