Survey: Long-Only Traders Fear Impact Of HFT On Equities

Sep 12 2011 | 9:09am ET

Over two-thirds of traders at leading asset management firms worldwide are concerned about the impact of high frequency trading on the equities market, according to a recent Liquidnet poll.

Liquidnet’s Institutional Voice Survey polled over 300 traders from firms based in North America, Europe and the Asia-Pacific region.  Participants were polled during a three week period ending July 7, 2011.

“The survey reveals that there is strong conviction among the vast majority of long-only traders that HFT is a negative for institutional investors trading in large size, adding some hard facts to what’s previously been speculation about institutional attitudes,” said Seth Merrin, founder and CEO of Liquidnet. “Investors are clearly concerned that their long-term investment styles are at odds with the speculative, nano-second profit taking approach utilized by high frequency traders.”

Studies by independent industry research analysts Aite Group and Tabb Group show that almost 75% of overall daily equities trading can be attributed to high frequency trading.

Said Merrin, “Institutional investors who manage trillions of dollars on behalf of Main Street investors need to be able to get in and out of positions in a safe and efficient manner away from the retail markets and internalization engines where HFT thrives, particularly in the volatile markets like we have been seeing recently.”

Liquidnet’s poll showed that global traders are more concerned about HFT than those who trade only in their regions. Roughly two-thirds of traders based in North America expressed concern about HFT compared to 60% of European respondents and over half of Asia Pacific-based respondents. Among the top five global institutions, 73% of traders cited HFT as a “high-priority market-structure issue.”

Liquidnet is an institutional equities marketplace serving more than 630 institutional asset management firms that hold approximately 70% of the equity assets under management in the U.S. Liquidnet does not allow high-frequency trading in its marketplace.

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