Summer Solstice means millions not played
By Dian Vujovich
Twice a year the sun provides us with a solstice—one beckons in summer and the other winter. Each bring with it either the longest or shortest day of the year. While the difference in daylight time amounts to a second or so, one second on Wall Street today ain’t want it used to be.
We all know that time is money but never has a second in time carried with more weight —and the potential for making or losing billions—than it does in the markets today.
You can thank high frequency trading (HFT) for that fact as stocks don’t trade in seconds any more but in milliseconds and even billionths of a second. That’s a whole lot faster than our eyes can blink or our hearts beat. And for most of us, it’s also an unfathomable amount of time.
Over the past 125+ years, finding out the price of a stock or bond has moved from being hand-written on pieces of paper and delivered by foot runners to stock tickers and punch cards to real time computer programs that spit out prices. As a result, trades that once could take days and hours to execute now happen faster than Superman ever imagined, i.e., faster than a speeding bullet or light.
In 2006, high speed trading made up about 35 percent of all volume done in the markets. In 2009, it was reported that HFT accounted for over 70 percent of all trades done on the NYSE and NASDAQ.
On the plus side, super-speedy trading tightens the gap between bid-and-ask and is said to lower transaction costs.
On the minus side, not everyone is privy to the HFT advantage and that translates to a question of a fair playing field. Front-running being the most obvious sin. Another, flash crashes.
Yes, HFT is all about money and making and/or losing oodles of it as fast as is algorithmically possible. But the jury is still out on whether it’s an appropriate play or not. Nonetheless, it’s not going away.
While it’s anybody’s guess as to how much one-second added to a trading day would have meant to traders and investor portfolios had this year’s Summer Solstice fallen on a business day instead of Saturday, June 21, you can rest assured it would have been many many millions of shares and dollars.
FYI, the Winter Solstice falls on December 21 this year. It’s a Saturday, too. Sorry, but there will be no extra time for trading on that day, either.
To read more articles, please visit the column archive.