Why I Love High-Speed Trading by @Cimmerian999

Separately, and along with my colleagues Aaron Brown, Michael Mendelson and Hitesh Mittal, I have written several articles on high-frequency trading. We believe HFT has lowered investors’ trading costs and that many of the attacks on it are misguided. We have expressed concern that our fragmented, domestic trading infrastructure is technologically risky and due for a hard look, separate from allegations about HFT. Finally, we’ve noted the obvious: that while defending HFT broadly, we can’t and wouldn’t vouch that each HFT trader acts lawfully and ethically (nor would we do so for each Good Humor ice cream salesman).

Bloomberg View contributor Noah Smith recently wrote on HFT. I haven’t responded to other articles on HFT, but Smith focuses directly on our writings and his overall conclusion is very similar to ours, though far more equivocal. So, I will make an exception and respond to Smith — rather than to the legion of rather nutty pieces out there — out of respect, not ire.

First things first. Smith calls me a “hedge fund magnate.” Although being a magnate sounds kind of cool, my firm — AQR Capital Management — is more of a diversified-investment manager than a hedge fund. We manage a lot of traditional funds as well as hedge funds. In the hedge-fund space, AQR is known for demystifying strategies and rationalizing fees (in other words, lowering them), so the whole label is a little off. Still, it’s more interesting and punchy than “the senior guy at a midsize investment manager” and clearly “magnate” is better for me than “plutocrat,” “oligarch” or “fat cat,” so maybe I should feel lucky.


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