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Ultra-Fast Computers Corner Stock Market

By Rob Quinn, Newser Staff

Posted Jul 24, 2009 2:52 AM CDT

(Newser) – Traders using high-speed computers are making billions of dollars and leaving the rest of the stock market in the dust, the New York Times reports. "High-frequency" traders, who use algorithms to make millions of trades in microseconds, have helped big banks and hedge funds bounce back quickly, but critics say the rise of the robots is threatening market integrity.

High-frequency trading "is where all the money is getting made,”said a former chairman of the New York Stock Exchange. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.” With a small number of high-frequency traders now believed to account for more than half of market activity, the SEC plans to probe certain aspects of the strategy.

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A trader watches computer screens. High-speed computers using trading algorithms now account for more than half of market activity, according to some estimates. (AP Photo/Peter Dejong)

"It's become a technological arms race, and what separates winners and losers is how fast they can move," says an exec at NYSE Euronext, which operates the New York Stock Exchange. (AP Photo/Mark Lennihan, File)

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We’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else.
- Andrew M. Brooks, head of US equity trading at T. Rowe Price

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