Brattle academic advisor Michael Goldstein, a Professor of Finance and Chair of the Finance Division at Babson College, was quoted in a recent Wall Street Journal article, “The Markets Unplugged,” which discusses whether or not electronic trading benefits market efficiency.
Critics of high-frequency trading argue that modern electronic-trading platforms and exchanges are “rigged” in favor of those with technological know-how and access. On the other hand, some claim that any gains high-frequency traders make by stepping ahead of regular investors are more than offset by the efficiency and liquidity they provide.
The article asks just how efficient a market would be without these traders. “Volume would drop significantly,” Dr. Goldstein is quoted as saying in the article. “Clearly we shouldn’t eliminate electronic trading.” But, “the fact we have front-running in the past doesn’t mean we have to have it now.” Before electronic trading, traders had an ethical obligation to handle client orders fairly. “If trading is happening electronically, there should be (the same) obligations on that” Dr. Goldstein argues.
To read the article in its entirety, please visit The Wall Street Journal’s website.