High-frequency Trading Trips Up Junior Mining Stocks

stock-market-2-300x210According to Chad Fraser, MacDonald Mines Exploration (TSXV:BMK) recently put out a press release that grabbed a lot of attention in the junior mining community. The release, which came out on January 9, is an update on the drilling program the company plans to conduct at its Butler property, located in Ontario’s Ring of Fire, early this year.

But it also contains what the company calls a “background on [the] current mining exploration environment.” And that environment is looking increasingly difficult, according to MacDonald’s president and CEO, Kirk McKinnon, who states in the release that the industry is being “decimated” as juniors continue to struggle to secure financing.

McKinnon is not the only one concerned about the sector. Other industry watchers, like John Kaiser, publisher of the Kaiser Bottom-Fish Report newsletter, have also commented on the industry’s struggles. In a December article, Kaiser revealed that of the 1,803 junior mining companies he is currently tracking, 632 have less than $200,000 of working capital.

Making matters worse, according to McKinnon, is the practice of high-frequency trading (HFT), which involves using powerful computers to scan markets and place buy and sell orders — many of which are later canceled — in fractions of a second. These trades are often made using automated algorithms based on preset criteria. Speed is the key: so important is fast execution that some HFT firms place their servers next to exchange servers in order to shave milliseconds off the communication time between the two, a Financial Times article notes.

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One Response to High-frequency Trading Trips Up Junior Mining Stocks

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