Toxic Trading on Wall Street

It's a mean, mean financial world, where predators operate in microseconds; individual investors need all the help they can get.

So we learn via John Mauldin who calls attention to a white paper written by Themis Trading, called "Toxic Equity Trading Order Flow on Wall Street."

Basically, they outline why volume and volatility have jumped so much since 2007; and it's not due to the credit crisis. They estimate that 70% of the volume in today's markets is from high-frequency program trading. They outline how large brokers and funds can buy and sell a stock for the same price and still make 0.5 cents. Do that a million times a day and the money adds up. Or maybe do it 8 billion times.••• This is a game played out in microseconds.

The retail world doesn't get to play. This is a game only for big boys who can afford to pay for the "arms" needed to fight this war. But the rest of us pay for the game, as that half cent is like a tax on transactions, not to mention the increased daily volatility, which skews pricing.