Nearly half of buy-side firms believe high-frequency trading (HFT) is having a negative impact on their trades or hurting markets, according to new research.
A survey from consultancy Aite Group found 32% of buy-side firms believe HFT hurts market, while 13% said it had a negative impact on their orders. Despite this, a clear majority of respondents had confidence in US equity market structure.
Opinions on HFT continue to divide traders, with 41% of buy-side respondents saying it added liquidity to markets, while 14% said HFT was the natural result of changes to market structure.
HFT firms leverage superior technology and algorithmic trading, with many market participants believing the practice seeks to profit from large institutional orders, which are broken down across an increasing number of venues. Supporters of HFT believe it supplies an important market making function, especially in times of low liquidity and low volume.
The findings also showed nearly two-thirds of institutional investors see market competition in a positive light, and firms rated a high degree of satisfaction with US equities market structure, with only 19% of respondents indicating a lack of confidence. Further, 84% of those questioned had a high level of confidence in the fairness of US markets.
But institutional investors did reveal a certain level of unease with the growing complexity of market structure, regulatory changes, and instability related to HFT.
The leading concerns registered by buy-siders were regulatory uncertainty, market volatility, and HFT for both US and European markets.
The findings were part of an online and telephone survey of buy-side desks from traditional asset managers and hedge funds over the course of a month, with 22 buy-side traders participating. The survey also questioned attitudes towards market structure from retail investors, with 645 responses received.