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Trading & Dealing in Security Markets - Essay Example
Finance & Accounting
Pages 4 (1004 words)
The author of this descriptive essay mainly focuses on the discussion of the topic of Trading & Dealing in Security Markets. The author starts with the short introduction of the topic and comes to the interesting conclusions at the end of the research paper…
The author of the essay "Trading and Dealing in Security Markets" begins with that High Frequency Trading – HFT makes use of powerful computers that automate the trading process and where trading software takes the decisions to buy, sell or hold stock. The practice is also called as Algorithmic trading, Algo trading, automated trading or black box trading. Since the commands are executed by software systems, positions on various stocks are held for durations that vary from a few seconds to a few minutes. HFT has been blamed for ‘flash’ price variations where the prices changes very rapidly for no apparent reason. With high profits almost assured and reduction of losses to a minimum, many traders have started using HFT. In a way, HFT represents the inevitable move to high technology. Like many other areas of business processes such as procurement, automatic ordering in supply change management, ERP systems, humans are removed from decision-making and power is vested in machines. At the end of the essay the author concludes that since HFT yields high profits, many more firms will take up this practice. HFT certainly has some ill effects on the stock movement and these needs to be constrained and regulated. The regulations must not place HFT under disadvantage and new technology must not be punished. The author also gives his recommendations. Thus, traders should not be allowed to switch off their machines when stocks are falling. This will ensure HFTs remain operational even when they stand to make a loss, just as any day trader. ...
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