High-Frequency Trading: A Rigged Race?

Don Bollerman of IEX recently offered a pointed critique of the New York Stock Exchange, and his op-ed is well worth the read. His primary concern? That the NYSE essentially operates two different gateways to the market: one slow (and affordable) for everyday investors, and one ultra-fast (and expensive) for high-frequency traders (HFTs) who engage in strategies like “quote-fading” and “latency arbitrage.”

For those unfamiliar, HFT relies on the ability to buy and sell assets in microseconds—profiting off market movements measured in fractions of a cent. While those fractions may seem trivial, they add up to substantial profits. Bollerman highlights how exchanges benefit from this dynamic: “They charge a premium to the fast, which enables them to make money trading against the slow. Manufacturing those kinds of trading opportunities creates market share and revenue for those exchanges.”

In short, the average investor is disadvantaged at nearly every turn—facing not only hidden fees, lack of transparency, and potential conflicts of interest with brokers, but now also a market infrastructure that’s literally built for speed… just not theirs.

Apple’s Slowdown: What Comes After the iPhone?

In January, Apple reported its slowest iPhone sales growth since 2007 and warned of its first revenue decline in over a decade. That naturally raises the question: what’s next for the tech giant?

Matt Levine of Bloomberg humorously suggested a few options: “Sell them a bigger iPhone on which they can play solitaire. A smaller iPhone for the wrist? A gold-plated wrist-iPhone that costs even more?” While tongue-in-cheek, Levine’s commentary underscores Apple’s current strategy: monetize the user base.

With over 1 billion active users, Apple’s goal has shifted from selling devices to selling services and accessories—think apps, subscriptions, wearables, and digital content. It’s not a bad strategy, but it also highlights how even the most dominant companies eventually have to adapt… or risk stagnation.

Dark Pools: Transparency’s Shadowy Opposite

Just the name—dark pools—sounds ominous. And in some ways, they are. These private exchanges are used by institutional investors to quietly execute large block trades without impacting public market prices. But when misused, they pose serious regulatory and ethical concerns.

Recently, Credit Suisse and Barclays faced SEC scrutiny and settlements over their dark pools—Light Pool and LX, respectively. Ironically, Light Pool marketed itself as the ideal venue for long-term investors, claiming to screen out opportunistic, short-term traders via a proprietary “Alpha Formula.” The goal was to exclude “pick-off artists” and allow institutional clients to trade with less fear of being front-run.

But there was a catch: the very system designed to identify short-term traders often misclassified legitimate clients, rejecting them unfairly. Even worse, it failed to block several actual high-frequency trading firms that were exploiting short-term tactics. To add insult to injury, the algorithm sometimes flagged successful traders as cheaters—essentially punishing profitable trades.

While the intention may have been to create a safer environment for long-term investors, the execution (no pun intended) left much to be desired. And it serves as yet another reminder of how even the most well-intentioned financial innovations can get warped by the profit motive.

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