Our privacy policy describes how Fidessa uses cookies on our website. If you continue using our website, you are consenting to our use of cookies. OK

Maybe markets are unfair, but are they rigged?

The publication of Michael Lewis’s new book Flash Boys has reignited the whole HFT/dark pool debate (actually, maybe it’s never really gone away). The point people seem to continually miss in this debate is the distinction between “unfair” and “rigged”.

To me the term rigged implies some malevolent conspiracy between certain members of an ecosystem aimed at taking advantage of an identified target. In this instance, the ‘patsy’ in question is supposed to be the retail punter and the ‘conspirators’ are the electronic trading firms that exploit the little guys’ inability to act as quickly as they can. Isn’t this just part of the natural world order of winners and losers, especially in a free market economy? Firms that invest their own money in technology to exploit the fragmented nature of markets deserve to make a profit just as much as anyone else.

The argument goes up a notch when you consider the institutional investment community, some of whom complain that they are left chasing a trail of small droplets of liquidity laid down by the HFT boys across the lit/dark spectrum. My response to this, as demonstrated by those more technology-savvy buy-side firms, is tool up and get into the fight. The only other alternative would be to replace the capitalist underpinnings of financial markets altogether, but in this case those same investment firms probably wouldn’t be needed at all…

2 Responses to “Maybe markets are unfair, but are they rigged?”
  1. Tony Mackay says:

    Most US retail flow gets sold to internalisers so doesn’t even hit the lit market that is supposedly rigged anyway. Contrast today where anyone that can buy a dell and programme it can ‘make markets’ against the old NYSE floor traders who paid millions if not billions for the right to have a 30 second look at all the flow before deciding whether to make a price or not. That all ended with Dick Grasso leaving NYSE and the SEC charging many of the old floor traders with fraud.

    So the markets may not be perfect today. But they are immensely better than 20 years ago. Technology has been the enabler.

  2. Steve says:

    Thanks for the comment Tony. It seems like there is a growing view that chimes with ours. Larry Tabb wrote a similar piece yesterday too http://bit.ly/1fOsmm5.

Leave a comment

Copyright © 2019 Fidessa Group Holdings Limited. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Fragulator® is a registered trademark of Fidessa Group Holdings Limited.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.