John McPartlend, a senior policy adviser at the Chicago Fed, urged to alter the exchange trading structure in order to slow down the trading, The Wall Street Journal reports. McPartlend's suggestion is to allow trades execution every half-second instead of a non-stop stream of trades, as it happens now.
According to the economist, high-speed trading inflates the risks. In particular, quick orders execution creates the illusion of high liquidity.
Besides, both private and institutional investors complain that they cannot keep up with pricey computer systems and miss profitable trades. Macpartlend said that modern financial markets are not oriented towards human beings.
The Fed representative believes that his suggestion can make exchange trading fairer to mutual funds and individuals, and сould help to scale back losses incurred by numerous market participants.
The use of ultrafast trading robots on the global exchanges has already resulted in several mini-crises. Thus, in May 2010, the U.S. leading indices plummeted 10 points due to the rush generated by the systems. After that, all new trading systems were carefully scrutinized by the regulators.
A similar collapse happened in October 2010, in Mumbai. The Indian publicly traded companies lost around $60 billion of their capitalization.
Moreover, the bugs in the software can lead to huge losses in other companies, employing modern computer programs. The most prominent example tells about Knight Capital investment company that lost almost $450 million in no time due to the wrong system installation. A comparable havoc happened in Russia as well.