According to Australian Mining’s Cole Latimer, fears over the affects of high frequency trading on miners have now surfaced in Australia.
OZ Minerals chief Terry Burgess had raised concerns that the practice may be behind the company’s falling share price, according to the Brisbane Times.
The practice allows people to carry out thousands of trade a second, increasing the volatility of the market and putting many smaller miners’ stock at risk.
Much of this trading is automated and unregulated.
It also creates more liquidity in the market and in turn creates lower costs.
It is believed that the annual profit of high frequency traders may sit around the US$20 billion mark in the US alone.
While it is legal in Australia, Canada, and the United Stated, it has been banned in some jurisdictions.
Burgess explained that he has seen OZ’s “share price [become] extraordinarily volatile over the last few weeks and we are uncertain about some of the things that are going on”.
‘We are seeing those big volumes of shares traded but for relatively small values … there was a day where 60 per cent of our trading had less than 100 shares traded.”