High Frequency Trading and Ethics

So a guy in the U.S. goes onto 60 Minutes last weekend, to help promote his book on High Frequency Trading (HFT) and all hell breaks out. In Trinidad, The Chief Risk Officer of a local bank allegedly uses insider info to profit from an IPO.

On the surface, these events seem disconnected but in my mind they are connected. We are in the final stages of a trend that began when the Rothschilds, by legend, used carrier pigeons to trade on the outcome of the Battle of Waterloo. The nature of this game requires that players leverage information in a way that blurs the lines of law and ethics. This line feels like a moving target as the various governments keep their finger on the pulse of public opinion. So what is considered shrewd business practice today is suddenly considered illegal tomorrow.

So in the U.S., the SEC has opened investigations into HFT. In Trinidad, after the media publicized the circumstances, the guy got fired and is now the subject of an investigation.

As I never grow tired of saying, all my Econ lecturers were wrong.  Most of the text books now espouse theories that no longer function.  Their ivory towers are increasingly divorced from reality.  The aim of the game has always been and will always be the manipulation of information to one’s own advantage.  Let’s see how this goes….



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