High-Frequency Trading Volume Triples In Aug. Volatility

Aug 17 2011 | 12:47am ET

As Traxis Partners’ Barton Biggs suspected, high frequency traders were a big part of this month’s stock market volatility.

HFT firms tripled their trading between Aug. 1 and Aug. 10, Wedbush Securities’ Gary Wedbush told Bloomberg News. For the stock market as a whole, trading volume increased only 80%. Between Aug. 4 and Aug. 10, equity trading volume set a five-day record, slightly higher than the volume following Lehman Brothers Holdings’ bankruptcy filing in 2008.

“We’re seeing a tremendous amount of high-frequency trading,” Wedbush said. “Their business is a trading business, and volatility creates far more opportunities. Some of their algorithms and automated systems are trading two, three or five times as many shares as they would in a more normalized environment.”

According to Wedbush, HFT firms have made up some 75% of U.S. equity volume this month.

Earlier this month, an unhappy Biggs said that he suspected “that we’re now into a high-frequency trading, momentum-driven cascading downturn.”

“I don’t understand what’s going on,” Biggs said, adding that he had reluctantly cut Traxis’ risk to protect capital.


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