High-Frequency Trading Has Made Markets More Efficient — Larry Tabb

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Scott Patterson of The Wall Street Journal writes that few developments in the financial markets in recent years have inspired as much debate—oftentimes rancorous—as the rise of high-frequency trading, the use of supercomputers by sophisticated trading outfits to jump rapidly in and out of markets.

In a recent interview with MarketBeat, Mark Cuban, the famed technology entrepreneur and owner of the Dallas Mavericks, called high-frequency traders “the ultimate hackers.”

But many in the financial industry argue that rapid-fire trading has made the market cheaper and more efficient. They point to the slow, clunky human-driven market of 10 or 15 years ago in which market makers and floor specialists dominated trading and took big slices of each trade for themselves. Today, they say, investors can buy or sell a stock on the cheap, and almost instantly.

To get another perspective on the impact of high-speed trading on the market, we conducted a Q&A with Larry Tabb, founder of the research firm Tabb Group. Mr. Tabb has been following the rise of computer trading for years and says that the market today “is more efficient than it has been at any other time in history.”

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