I have decide to pursue the same topic as the previous paper, high frequency trading. As an active trader in the market, I have experienced, first hand, the effects of high frequency trading. I first discovered the issue upon the release of Michael Lewis’s book “Flash Boys”. I read the book, and noticed that the problems he addressed were the same ones that I was having. It was from that moment that I chose to learn more about the practice. It is an issue that affects professionals of the markets worldwide. The practice should be brought to light and show the consequences of automated trading.

I intend to explore the obvious question of the practice: is it ethical or not? I also plan to investigate the consequences of the practice, as well to disprove popular misconceptions. My intention is to write a white paper to the Securities and Exchange Commission, which the regulatory body of the financial markets, in an effort to pursued them to regulate the practice. It is already aware that professional traders experience the effects of high frequency trading, so I feel that providing a retail trader’s perspective of the practice can provide the commission with a differing point of view. Since I will be writing to group of professionals, I will need to structure my paper to appeal to such audience. To do so, I will be heavily using academic journals, with a ratio of 3:1 academic sources to popular. If it were not for the requirements of the paper, I would only use academic sources, because I feel that would appeal the greatest to my audience.

Succo Interview RefAnnBib

Wolf Hunter of Wall Street RefAnnBib

Ethics of HFT RefAnnBib

Financial Fairness RefAnnBib

I have a fairly rough outline of how I want to structure my paper. I am opposed to the practice of high-frequency trading. I am thinking of doing a white paper for the SEC (regulatory commission of securities) showing them the negative aspects of the practice and why they should regulate it. I will definitely be using charts within the paper and will be explaining the charts and referring back to them. I feel that this is the most effective way to increase my ethos.

My only concern would be how I would address the counter argument and state why it is not valid, without ruining my ethos.

Original Summary:

Brad Katsuyama came to work on Wall Street when he was twenty three. He worked for Royal Bank of Canada, trading energy stocks, then tech stocks. He soon became head of that desk, managing about twenty people. In 2006, RBC bought an electronic trading firm. That is when Katsuyama says “all of our troubles began”(Lewis). At first, Katsuyama thought that it was only and internal problem, but after speaking to some friends at other large banks and hedge funds, he found out that the problem was systematic. Everyone was experiencing it. He turned the blame to the newly acquired electronic trading firm. Katsuyama found out that some funds and banks have been using algorithms to trade the market at lightening speed, a practice known as high-frequency trading. Brad Katsuyama left RBC to create a new exchange, one that is not dominated by “quant” traders. The effects of high-frequency trading are highly noticeable, and have had a profound effect on the markets.

Revised Summary:

Royal Bank of Canada, the fifth largest bank in the United States, was a complete nobody on Wall Street. That was where Brad Katsuyama took his first job on the Street at the age of twenty three. In his early years at the bank, Katsuyama traded energy stocks, then tech stocks. He eventually went on to become head of that trading desk. RBC had bought an electronic trading firm in 2006, which is when “his troubles began”(Lewis). Initially, Katsuyama thought the problem was strictly internal. But, by June 2007, “the problem had grown too big to ignore”(Lewis). There was no way that this was an internal problem. He started calling friends from other banks and hedge funds and “he came to realize that they were dealing with the same problem”(Lewis). The newly acquired electronic trading firm soon found the blame. As it turns out, they, along with other banks, have been using algorithms to trade the market at lightening speed, a practice known as high-frequency trading. Katsuyama has had enough of it. He left RBC to create his own exchange, one that is not dominated by “quant” traders.

Lewis, Michael. “The Wolf Hunters of Wall Street.” The New York Times. The New York Times, 05 Apr. 2014. Web. 06 Nov. 2014.