High-frequency trading distorts commodities prices

High-frequency traders have caused U.S. commodity futures prices to disconnect from market fundamentals of supply and demand since the 2008 financial crisis, according to one of the authors of a forthcoming U.N. report.

Also known as black-box players, they plug algorithms into computers to generate numerous, lightning-speed automatic traders that are designed to make money from arbitrage on razor-thin price differences and movements.

An increasingly high correlation between commodities and equities, caused largely by High-frequency traders , means that prices for oil and other U.S.-traded contracts are more exposed to “sudden and sharp corrections”, said a draft report seen by Reuters, Drovers CattleNetwork reports.

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