Whatever its perceived benefits, HFT is changing the way the stock market operates.
It used to be that companies went public to raise capital; investors took risks by buying company stock, and the company and investors were rewarded when the company used its capital wisely. The principles of supply and demand dictated stock prices, creating an efficient market in which prices adjusted based on market demand.
But HFT is affecting market fundamentals.
The majority of trades taking place today are driven not by company performance, but by tiny inefficiencies that only computers can detect. While investors are advised to “buy and hold” their investments for years, computers are trading in nanoseconds. High-frequency traders also buy and sell options, futures, exchange-traded funds (ETFs), currencies and all other financial instruments that are traded electronically, so its impact goes beyond the stock market.