Interview with a High Frequency Trader

In the wake of this week's stock market trading calamity with Knight Capital, it's instructive to know more about high frequency trading (HFT). This disruptive force now represents well over the majority of transactions on major US equity exchanges.

Why should you care?

Many Americans now have significant assets in 401(k) plans and other financial tools. Most people, including me, are relatively unsophisticated in their grasp of how the current markets work, even though most of their money is tied up in various, often complex financial instruments. This is especially true with popular instruments such as Exchange Traded Funds (ETF). The commitment of retail investors in the stock market is a tremendous change from the generations that grew up in the mid-20th Century. The market, while followed on daily television, is more opaque than ever before. HFT is an important case in point.

To understand a bit more about HFT, the financial blog zerohedge.com recently reposted a useful, informative insider interview about high frequency trading. It's linked here. The interview is accessible to nonspecialists and frankly is a "must read" for anyone who wants to get a handle on what's really going on in finance.

The facts are not pretty, but the zerohedge.com post reflects reality. Read it now.