Seven in 10 US investors think the equity market is not fair for all participants, according to a survey by broker ConvergEx.
The issue of whether US markets are rigged against the interests of investors has been under intense scrutiny since the publication of Michael Lewis’ exposé of high-frequency trading (HFT) “Flash Boys” was published last month.
ConvergEx’s survey of 357 market participants found more than half thought HFT is harmful or very harmful to them, while just 19% felt it was helpful.
Survey respondents also revealed they were relatively unprepared to counter the negative effects of HFT despite awareness of the issue. Just 22% said they had made some changes to their trading style as a result of HFT, with 71% having done nothing to tackle the problem.
Eric Noll, president and CEO of ConvergEx Group, said: “Our survey reveals a financial community that is not yet sure how to respond to HFT and the rapidly changing marketplace. ConvergEx is committed to helping its clients navigate this evolving structural and regulatory landscape.”
In his recent book, Lewis states that the speed advantages possessed by HFT firms, including co-location, favourable information distribution and expensive proprietary pipes between exchanges, mean it is difficult if not impossible for other investors to profit on financial markets in the US. The book has thrust the argument into the public sphere and regulators are now taking a much closer look at the role of HFT and how it affects the broader market.
The survey found there was some support to address the issue with increased regulation, and 43% said more regulation was needed. However, 38% felt existing rules were sufficient.
“Our survey found that a majority of financial industry participants believe that the US equity markets are unfair and that HFT is harmful. What may be surprising, however, is that most people seem to be taking a wait-and-see posture. Very few respondents to our survey have made any changes recently to the way they interact with the markets and the majority feel that regulatory changes can provide answers,” Knoll added.