Algorithmic trading, which is done by computers, can buy and sell stocks in huge quantities in microseconds. This is where the concept of flash crashes comes from. These aren’t done by humans, but by computer algorithms that have been programed to watch news sources for key indicators and then act on them. Believe it or not, those microsecond buy and sell orders are very profitable for the owners of the algos (banks) and the idea of charging a tax is to stop this from happening.
[Algorithmic trading, which is done by computers, can buy and sell stocks in huge quantities in microseconds. This is where the concept of flash crashes comes from. These aren’t done by humans, but by computer algorithms that have been programed to watch news sources for key indicators and then act on them. Believe it or not, those microsecond buy and sell orders are very profitable for the owners of the algos (banks) and the idea of charging a tax is to stop this from happening.]
The flash crashes don’t bother me. Eventually, value seeks its true level, determined by company revenues, profit margins, balance sheets and returns on equity.
[Algorithmic trading, which is done by computers, can buy and sell stocks in huge quantities in microseconds. This is where the concept of flash crashes comes from. These aren’t done by humans, but by computer algorithms that have been programed to watch news sources for key indicators and then act on them. Believe it or not, those microsecond buy and sell orders are very profitable for the owners of the algos (banks) and the idea of charging a tax is to stop this from happening.]
It’s more insidious than you describe....
Michael Lewis the guy who wrote The Big Short about the 2008 financial crisis wrote another great book about the front running of stock trades by High Frequency Traders using nothing but computers to jump in front of other trades by milliseconds in hopes of make a profit of 1-2 cents per share, the traders can make money regardless if the stock is going up or down...
The title of the book is called “Flash Boys”, it details how these HFT firms spend millions and millions of dollars in trying to gain a 1-2 milliseconds advantage