Bradley Lewis, a professor in Economics, recently reported that one main purpose of imposing taxes on high frequency trading is because they want to reduce the profitability of using high frequency trading as trades. High frequency tradingg uses systems to make trades that can trade in milliseconds. One of the set backs is that the systems reportedly have a profit margin of only 0.01% on every trade.
Some of the advantages of this type of trade as stated by professor Lewis is the fact that they can access information ahead of time and by trading in milliseconds ahead of others traders can collect more than those who are slower. Another advantage is that by building this system it can create extra trades and by having high volume of trades it means more profits.
A setback in using high frequency trading is the fact that high frequency trading only target short term investors. Investors will not be able to make profits they desire or stay in the market long term because high frequency trading is only pushing the people to the back of the line temporary or outguessing other high frequency trading investors. Another issue with using high frequency trading is the fact that it does not help with the maintenance in liquidity in the market. Since high frequency trading targets short term buyers it does not concentrate on gaining largest profits. A issue is the fact that the market focuses on those that throw down millions and concentrates on big investment. high frequency trading is only useful for those that throw down smaller investments which does not gain as much profit as trading manually.