Explain Like I'm Five

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ELI5: Why is high frequency trading allowed? (lemmy.ca)

submitted 2 months ago by [email protected] to c/[email protected]

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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.

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[–] [email protected] 22 points 2 months ago (3 children)

Maybe we could charge a minor fee per transaction, too small to matter for most stock traders. High frequency traders though would have to pay quite a lot simply by making lots of transactions.

[–] [email protected] 12 points 2 months ago

They pondered some ridiculously low fee, like 0.0000002% (no kidding) and it was too much here in the EU.

[–] [email protected] 2 points 2 months ago

The investment bank already does that and calls it commission. It's basically how the Wolf of Wall Street's main character got started: commission on penny stocks.