The “Inbox Test for Stability of the Global Financial Market”

Another day, another email in my inbox announcing another High Frequency Trading conference. I have nothing against the emails (we send quite a few of them ourselves) and I have nothing against HFT per se. But a large number of emails on the same subject in a short space of time is a sure sign of a bandwagon. And bandwagons are often bad news for the markets. More specifically bad news for shareholders, but often the cause for bumper bonuses for bankers.

The last time my inbox was bombarded with emails of such monotony was during the heyday of credit derivatives. At the time I said that the credit derivatives models were stupid but unfortunately I hadn’t fully realized the size of the market, and therefore the potential for systemic risk. The state of my inbox should have warned me.

Now I know better. So according to my inbox there is far too much algo/hf/computerized trading. The minimal benefits this confers in terms of supposed “efficiencies” is far outweighed by the potential it has for causing chaos. Penny wise, pound foolish.

P

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