146
ELI5: Why is high frequency trading allowed? (lemmy.ca)
submitted 2 months ago by Eiri@lemmy.ca to c/explainlikeimfive@lemmy.world
31 comments fedilink hide all child comments

I don't see how it's a benefit to capitalism or companies or, well, anyone, really, to allow people to make thousands of trades a day for minute profits on each.

My gut feeling is that the stock market would not suffer, and less resources would be wasted, if trades and updates to stock prices were limited to, say, one batch per hour.

There are probably reasons the system is the way it is though.

you are viewing a single comment's thread
view the rest of the comments
[-] JohnDClay@sh.itjust.works 2 points 2 months ago* (last edited 2 months ago)

People would trade stocks with each other in between those hour intervals. It'd become another after hours trading. It might cut down on the change rate though since it'd make high frequency trading more annoying and cumbersome.

But slowing the refresh rate of trading I think would also make it take longer for stocks to settle after a shock. I think the limited trading windows is one of the things driving Bitcoins volatility? Increasing the time between when something happens and when the effect is felt would decrease the damping on the system.

Edit: sorry I missed the eli5, this is not a super simple answer

this post was submitted on 31 Aug 2024
146 points (100.0% liked)

Explain Like I'm Five

14205 readers
2 users here now

Simplifying Complexity, One Answer at a Time!

Rules

  1. Be respectful and inclusive.
  2. No harassment, hate speech, or trolling.
  3. Engage in constructive discussions.
  4. Share relevant content.
  5. Follow guidelines and moderators' instructions.
  6. Use appropriate language and tone.
  7. Report violations.
  8. Foster a continuous learning environment.

founded 1 year ago
MODERATORS
sabbah@lemmy.world
AradFort@lemmy.world
rikudou@lemmings.world
Don_Dickle@lemmy.world
Rikudou_Sage@lemmy.world