From the report of Derek Klobucher (Forbes), more than a quarter of market participants find its current structure “very weak,” according to a recent TABB Group poll, which indicates that all-too-frequent computerized trading goofs are eroding market confidence. Last month’s Knight Capital tech tragedy killed almost 20 percentage points-worth of warm fuzzies.
That’s 26 percent of drivers behind the trading wheel feeling that the track is “very weak,” up from just 7 percent in June and 3 percent in May. Slowing down the markets would help prevent such disasters and restore investor confidence, according to more than 30 percent of asset managers polled.
But they aren’t taking into account the cost of easing off the accelerator.
Pedal to the Metal
There’s no yellow flag flying over the market yet. So decelerating electronic trading is a bad idea, Irene Aldridge of New Yorkhigh-frequency trading-based service provider ABLE Alpha Trading wrote last week.
“Modern market-makers’ profits are directly related to the number of market orders they service,” Aldridge said. “The more trades the market-maker can take on within a given fixed period of time, the higher is the market-maker’s profitability.”