High Frequency Nerve Center in Mahwah N.J.

June 10, 2010

“The unlikely nerve center of high-frequency stock trading is Mahwah, N.J., a suburb around 35 miles from Wall Street. And trading firms are flocking there to get an edge when it comes to speed. The New York Stock Exchange has opened a huge fast-trading hub in town.”

For the story, listen here.

2 Responses to “High Frequency Nerve Center in Mahwah N.J.”

  1. I very much enjoyed the NPR story! I thought the arguments pro and con were a bit weak, though. Is there a better source for especially the pro argument? Is there a credible claim to make that the high-frequency traders are aiding in price discovery and whatnot, and not just skimming money off the large volume institutional investors (and thus, indirectly, pensioners and so on)? I’d love to read a good, thoughtful, but still aimed at the general reader, defense of the practice.

  2. danielbeunza Says:

    Hey Dan, here’s the source you asked for:

    Does Algorithmic Trading Improve Liquidity?
    Terrence Hendershott, Charles M. Jones, and Albert J. Menkveld. Journal of Finance, Forthcoming

    Algorithmic trading has sharply increased over the past decade. Does it improve market quality, and should it be encouraged? We provide the first analysis of this question. The NYSE automated quote dissemination in 2003, and we use this change in market structure that increases algorithmic trading as an exogenous instrument to measure the causal effect of algorithmic trading on liquidity. For large stocks in particular, algorithmic trading narrows spreads, reduces adverse selection, and reduces trade-related price discovery. The findings indicate that algorithmic trading improves liquidity and enhances the informativeness of quotes.


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