84% of All Stock Trades Are By High-Frequency Computers … Only 16% Are Done By Human Traders

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Machines Dominate the Market … Real Human Traders Are Only Very Small Fish In a Big Pond

As of 2010, 50-70% of all stock trades were done by high frequency trading computer algorithms.

And many other asset classes are dominated by high frequency trading as well.

High-frequency trading distorts the markets.  And see this and   this.  And it lets the big banks peak at what the real traders are buying and selling, and then trade on the insider information. See this, this, this, and this.

Morgan Stanley has just shown (via the Financial Times) that the percentage of high frequency trading in the stock market has skyrocketed to 84%:

Trading by “real” investors is taking up the smallest share of US stock market volumes [since Morgan Stanley  started keeping track 10 years ago.]

The findings highlight how US trading activity is increasingly being fuelled by fast turnover of shares by independent firms and the market-making desks of brokerages, many using high-frequency trading engines. [actually all of the market-making desks are using it.]

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The proportion of US trading activity represented by buy and sell orders from mutual funds, hedge funds, pensions and brokerages, referred to as “real money” or institutional investors, accounted for just 16 per cent of total market volume in the form of buying, and 13 per cent via selling in the final quarter of last year, according to analysis by Morgan Stanley’s Quantitative and Derivative Strategies group.

It’s not just the U.S. High frequency trading dominates in the U.K. as well.

Category: Think Tank, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “Machines Dominate the Market: 84% of All Trades HFT?”

  1. keithpiccirillo says:

    Will it be quote stuffing or reaction to a currency crisis for the next flash crash to take place?
    HAL: “Let me put it this way, Mr. Amor. The 9000 series is the most reliable computer ever made. No 9000 computer has ever made a mistake or distorted information. We are all, by any practical definition of the words, foolproof and incapable of error. “

  2. [...] What are we to make of the rise of the HFT machines?  (Big Picture) [...]

  3. huesos says:

    And your point is????

  4. [...] Barry Ritholtz did a piece yesterday with loads of links to various articles on HFT, with the take-home point being that HFT accounts for 84% of all stock trades.  This, by anyone’s book is a huge proportion.  But the big question is -  for a trader, does it actually matter?   [...]