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Views on News: Limits on high-speed trading


This article appeared in the Straits Times yesterday and suggests what we have been taught and understand is completely wrong. Even I admit I’m guilty of just accepting what I was told as it seemed pretty logical at the time.

For those of you who don’t know what high-speed trades are, this article is also useful, go find out because the manipulation of the stock markets involves greater impacts than just the people who trade the various markets.

High-speed trades are done using computer models that have been programmed by highly intelligent econometrists using all sorts of combinations of variables to create an algorithm. And once this programme determine that the conditions are met to start buying, it will trade at speed of light to “try” to catch the market out and resell at a higher price. And it closes all its positions within seconds or nanoseconds for profits. Sounds like a gold mine eh? So go read up!

I have always been told that high-speed trades are useful, they help investors achieve liquidity in the market and we have to embrace them even if they have some very nasty side effects. And now I think is a good time for all of us to start asking ourselves questions about financial governance, and the products they involve. Even recently, some banks have been culpable of fixing the Libor rates and now questions are emerging whether the Sibor (Singapore’s version of the interbank lending rate) are being manipulated. AND this, my friends, impacts your home loans, which should concern everyone.

So I urge everyone to read this article, and look out for more financial governance articles as well because they impact your everyday life. And you shouldn’t just think the government will take care of it.

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