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ELI5: Why is high frequency trading allowed? (lemmy.ca)

submitted 2 months ago by Eiri@lemmy.ca to c/explainlikeimfive@lemmy.world

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I don't see how it's a benefit to capitalism or companies or, well, anyone, really, to allow people to make thousands of trades a day for minute profits on each.

My gut feeling is that the stock market would not suffer, and less resources would be wasted, if trades and updates to stock prices were limited to, say, one batch per hour.

There are probably reasons the system is the way it is though.

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[-] BackOnMyBS@lemmy.autism.place 8 points 2 months ago

I think one reason is that the stockbrokers make profit off of every trade through commission. The more trades, the more money they make. Thus, they would lobby to make it legal. Furthermore, limiting number of trades would upset traders by restraining their ability to trade, which would upset a voter base. There's really no one that would care enough to provide the political capital necessary to implement the limitation.