Sunday, October 9, 2011

High Frequency Trading, 3rd Quarter Earnings and Looking for Light at the End of the Tunnel

Since late July, global markets have moved wildly, driven by a broad set of global economic concerns. In addition, an article in today’s New York Times noted that regulators are concerned that high-frequency trading is increasing market volatility. This week, the 3rd quarter earnings season begins with financial results from firms such as Alcoa Inc., Google Inc., Infosys Technologies Ltd., JP Morgan Chase & Co. and PepsiCo, Inc.

While investors are justifiably concerned about economic uncertainty, a lot of the bad news is well understood (a lack of transparency in the banking system mixed with poor political responses). The earnings season commentary from hundreds of companies in the coming weeks will be critical components in assessing short and intermediate term economic and investment trends. Given the almost universally negative tone in the markets, perhaps a short term bottom has been established. Regarding high-frequency trading, it is about time this significant problem is addressed.

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