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Institutional Traders Concerned About HFT —Liquidnet Survey

Two-thirds of Liquidnet's institutional clients in North America indicated they were concerned about high frequency trading's impact.

More than two-thirds of the institutional traders at leading asset management firms around the world surveyed by Liquidnet are concerned about high frequency trading (HFT) on the equities, the global electronic marketplace reports this morning.

Liquidnet’s Institutional Voice Survey polled traders worldwide from Liquidnet’s community of 630 institutional asset management firms. These firms collectively manage equity assets of more than $13 trillion.

“The survey reveals that there is strong conviction among the vast majority of long-only traders that HFT is a negative for institutional investors trading in large size, adding some hard facts to what’s previously been speculation about institutional attitudes,” stated Seth Merrin, founder and CEO of Liquidnet in the release. “Investors are clearly concerned that their long-term investment styles are at odds with the speculative, nano-second profit taking approach utilized by high frequency traders.”

Liquidnet also noted that independent industry research analysts at Aite Group and Tabb Group have estimated that almost 75 percent of overall daily equities trading can be attributed to high frequency trading. Liquidnet does not allow high frequency trading in its marketplace.

Broadly, global traders are significantly more concerned with HFT compared to those who only trade in their regions. At the top five global institutions, 73% of the traders said they regarded high frequency trading as a high-priority market-structure issue.

Traders concerns around HFT ran the highest among those based in North America with two-thirds identifying themselves as concerned about HFT, noted Liquident. Nearly 60% of European respondents and more than half in Asia Pacific expressed concern regarding HFT’s impact on trading performance.

Merrin added, “Institutional investors who manage trillions of dollars on behalf of Main Street investors need to be able to get in and out of positions in a safe and efficient manner away from the retail markets and internalization engines where HFT thrives, particularly in the volatile markets like we have been seeing recently.”

Liquidnet said the results from this year’s survey are based on more than 300 responses from firms based in North America, Europe and the Asia-Pacific region. These firms included mutual fund, pension fund and hedge funds, who hold approximately 70% of equity assets under management in the U.S. Participants were polled during a three-week period ending July 7, 2011.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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