Anyone who reads this blog knows that I respect the advance of technology in business. I respect efficiency and I respect cleverness. However, I value responsibility above all of these, and I feel that business has been moving further and further from that.
The newest perpetrator in irresponsible behavior is the New York Stock Exchange and they are doing so with their new facility in New Jersey dedicated to fast trading. For those who don’t know what that is, it’s a new way of using computers to perform potentially thousands of trades every second. However, by its very nature this will do nothing but further destabilize an already very unstable market with tiny trades that make trending absolutely impossible.
Fast trading lends itself well to older trading strategies that will become even easier now, specifically sculpting, which can be incredibly dangerous in an unstable market.
Sculpting is where traders buy and sell incredibly quickly, usually for a profit of only a few cents per share, gaining a quick buck while keeping shares of companies in a perpetual state of flux. This can make it difficult or impossible for legitimate traders to actually purchase or sell shares of a company, preventing the price from settling from one second to the next and unnaturally altering the value of the stock.
The new NYSE hub will contribute to the instability that this kind of trading brings to the market. It has the potential to take an already shaky market still trying to get back on its feet after the crisis less than a year ago and further shudder it to pieces the same way that program trading contributed to the ’87 crash by mindlessly selling at the wrong times, exacerbating the problem. In this case, the problem is quick-money traders looking to manipulate the market in tiny ways that add up very quickly, and a fast trading hub in New Jersey will do nothing but make it possible for this irresponsible behavior to continue.
