New Report Claims High Frequency Trading Costs Ordinary Australian Investors $1.5 Billion Per Year

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A report out this morning claims High Frequency Traders cost ordinary investors $1.5 billion a year, though the research methods have been thrown into question.

The report by lobby group Industry Super Network calculated the figure by taking a quarter of all share market trades and multiplying that by the average spread between the bid and offer price of Australia’s top 200 stocks.

That spread, according to ISN, is what ordinary investors could take advantage of if there was no high-frequency-trading.

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ISN wants changes to protect people from high-frequency-trading.

Last week the Australian Securities and Investments Commission decided it wouldn’t go ahead with plans to put speed limits on small trades.

Experts have rubbished the report though.

Dr Alex Frino from the Macquarie Graduate School of Finance told the Australian Financial Review the report wrongly assumed HFTs are extracting the bid-offer spread from everyone on every trade.

“And just because they are benefiting from the bid-offer spread does not mean that they are ripping value out of the market. It offers a reward for ­providing valuable liquidity in the ­market,” Frino told the Fin.

ASIC’s head of markets also told the newspaper ISN’s report was flawed, and that the regulator didn’t see any need to add extra regulation when the problem wasn’t that big.

Read more here.

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