Does this look like a picture from a free, fair, non-manipulated market?
It is a so-called "bandsaw II" formation, indicating a certain type of high-frequency trading activity.
If you find it unsettling, you are not alone: Here, the Financial Tmes
mulls the wisdom, fairness, and future of HFT (high-frequency trading).
As many or most of you are already well aware, HFT is one of the most rapidly growing (and controversial) area of finance. To simplify grossly, it
uses machines and algorithms to "dip automatically in and out of markets hundreds of times faster than the blink of a human eye," as the Fincial
Times puts it.
Some interesting points from the article:
-A hot buzzword in the HFT world at the moment is "co-location:" This involves setting up computers as physically close to markets as possible, in
order to shave crucial microseconds off of transactions.
-HFT is worrying a number of traditional market players, such as fund managers, who fret that it is disrupting orderly pricing, destroying long-term
investing, and creating a sense among investors that the market is rigged. Such perception could impact liquidity and overall trust in the markets.
- Sen. Ted Kaufman criticizes aspects of HTF, stating: that "[factors] may be combining in ways that cast doubts on the depth of liquidity,
stability, transparency and fairness of our equity markets." Less-than-glowing love for HFT has been expressed by the SEC and other regulatory
-Some even allege "predatory" HFT practices, like deliberately overloading competitor's networks with signals to slow them down. Frankly illegal
practices are also alleged by some.
-HTF fans say the practice delivers liquidity and benefits clients, but a chourus of doubtiful voices is rising.
Click here for source
of the above summarized information. The article
contians a number of other points about HTF as well.