High-Frequency Trading: Bad

Doesn't it seem like every day, there's a new negative article on High-Frequency Trading? Blogs, newspapers, magazines, everybody has joined in the fun.

Maybe it's because this is a slow summer, news-wise. Besides Iran (already old news), Michael Jackson's death (he's still dead), Gates-gate (getting stale by the minute) and Nicolas Sarkozy's stealth heart-attack, not much is happening. Thus the appeal of a trading style nobody understands or has even ever heard of (never mind that it's basically automatized day-trading), therefore making it the perfect villain, to be blamed in advance for the next crash.

What's more surprising is to read a quantitative finance guru, Paul Wilmott, contribute to the discussion with a simplistic, sensationalistic and pretty mindless article in the New York Times where he concludes with the following platitude:

"Buying stocks used to be about long-term value, doing your research and finding the company that you thought had good prospects. Maybe it had a product that you liked the look of, or perhaps a solid management team. Increasingly such real value is becoming irrelevant. The contest is now between the machines — and they’re playing games with real businesses and real people."

That's pretty rich coming from a guy who had a hand in designing many of the very algorithms he's criticizing and in educating many of the people running them.