The promotion of Michael Lewis’ new book has caused a significant amount of discussion in the media around whether or not High Frequency Trading (HFT) causes harm to the integrity of financial markets. The debate is very interesting. One argument says that HFT makes markets more efficient and expedites the arbitrage of the occasional inefficiency, while the other says that it is a big scam causing investors to lose out on profits.

At PWL, we aren’t overly concerned by either side of this debate. The ability of High Frequency Traders to rapidly create small profits using superior technology is not a new phenomena; it is an issue that is generally present when dealing with market orders and order routing. As an example, an active manager who wants to trade specific securities within a short time period would be affected by these issues.

The way that we invest our clients money does not require us to make large market orders, and it does not require rapid trade execution.

We invest in asset classes rather than the latest hot issue which means that individual stocks with the right characteristics become interchangeable parts in a much broader strategy. The flexibility in our approach eliminates the needs for the immediate liquidity that HFT is able to profit from.

We like to keep an eye on the news, but PWL is able to quietly step away from the turmoil in the financial media while our clients happily capture the performance of global markets. Business as usual.