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Saturday, September 5th, 2015


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The Role of High-Frequency Traders in the Stock Market

The Role of High-Frequency Traders in the Stock MarketStock market activity during the first two weeks of August, particularly during the period of August 4-10, set a number of records. According to the Chattanooga Times Free Press, equity volume during those days amounted to 15.97 billion shares traded, the greatest yet to be measured during any five-day period. This uptick in activity is being attributed in part to the actions of high-frequency traders, or HFTs.

The news source reports that trading by HFTs currently amounts to approximately 53 percent of daily equity volume trading, a significant increase in their 26 percent amount recorded in 2006. Their actions are being viewed with dubious scrutiny by some, particularly since the sudden flash crash of May 6, 2011, when the Standard & Poor's 500 index fell by 6.2 percent in only 20 minutes.

HFTs are reported to use the complex mathematical formulas of algorithms to uncover patterns in stock market activity and use that information to their benefit. Some believe that their activities are unscrupulous and provide something of an unfair advantage, according to the news source.

According to Reuters, U.S. retail stocks and gains in crude oil prices are the current sources of notable increases in global stocks, potentially stabilizing the equity market.

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