In the last decade of so, black box trading has taken over the market. Also known as high frequency trading, using individuals that are well educated in the realm of computer programming, they are able to create algorithms that scrape pennies off the top of the market order flow. The number of trades these computer models generate are vast. There is secrecy and mystery surrounded by this realm of trading. This video documentary gives a little insight of what goes on in the world of high frequency trading.
As electronic trading has evolved over the last decade, some say that the playing field has been leveled. The internet has made data, information, and charts available to the home brewed stock trader. However it is interesting to note that in this video, the big boys of Wall Street have found a way to maintain their edge by hiring quants to exploit tiny market fluctuations.
Wall Street is a battle field. All parties trading should realize that when you trade in the market you are going up against some of the best and the brightest. As a trader you should always stay up to date on the the latest technology and innovations happening in the market place.
There are some serious concerns this video reveals. The interviewee alleges that the market may be rigged. The order flow and priority of types of market orders may fall favor to certain trading institutions. It is assumed that there is somewhat a conflict of interest. The highest volume traders have a priority, and very close relationship with the exchange. It seems that these individuals or institutions are able to bypass other traders in line ready to get their order filled. Keep in mind that this happens in nano seconds and is very hard to detect.
It’s especially hard to prove that an injustice is happening. The technology is so cutting edge that, the courts would probably have a very hard time perceiving what is actually happening. The average investors on the buy side of the market, like pension funds, mutual funds, and retirement funds are victim to what is actually going on.