High frequency trading is something that has been gradually coming on because of computers. So, instead of sitting there with your finger to push the button, when a bidder ask comes up that you want, you can program a computer to do that, and the computer program can trade algorithmically. So that the execution, some of those things you may never even see them. An offer to buy or sell would appear and disappear within such a tiny fraction of a second that you couldn't even see it. So, what you can also do is trade, you can also enter on your computer a trade that flashes up for just a millisecond, and so only computers will respond. So that could be a strategy that you would use. You only want to trade with computers. While there's no formal way to do that, but you just cancel your order after a millisecond, and that you can be sure that no humans will be able to trade that. The speed of transmission matters in this market, so you have to be, you have to start thinking about the speed of light. Electricity flows at approximately the speed of light and fiber optic cables also at the speed of light. So, if you are on the West Coast of the United States, that's 3,000 miles from New York, and you're dealing with the New York Exchange 3,000 miles at the speed of light, a 50th of a second or 20 milliseconds. That's too – it's not gonna go. You can't let it take 20 milliseconds. So, they have to move close to the exchange. Some people are alarmed by high frequency trading. They think all these high frequency traders can out — they can play much faster than I am and I'm gonna be destined to be a loser. But I don't think it's that worrisome if you don't trade too much. They can somehow tax trades a little bit in effect. Could you go over the pros and cons of high frequency trading, if, possibly, whether or not you think this battle to have the fastest connection between cities is actually adding value to the market? Yeah, I don't think that high frequency trading is particularly adding value to the market, and in fact, it's siphoning money out. And recent estimates show that it's a substantial suck on money from — it's not really socially viable. So one recent proposal was that we should change the way orders are executed. Instead of executing them instantly as they're placed, to group them up. Instead of every millisecond trade being executed as soon as it's received, you have them wait maybe a full second or maybe even 10 seconds. And so, it's like having separate auctions every 10 seconds, and all the trades that come in in that 10 second interval are grouped together and all reach, all are executed to the best buyer or seller for that longer interval. We can eliminate millisecond trading. This has been proposed. It's not my idea. It sounds like it's something that may actually happen in the not too distant future because this has nothing gained by — people are installing fiber optic cable so that they can be a millisecond ahead of some of other — in other words, there's already a fiber optic cable leading between two cities, but somebody says, "Yeah, but it's not the straightest route and if I cut it off a little bit straighter, I can get a whole millisecond. That's a gold mine to me." Well, it's not contributing to society, but that's the kind of thing that could be changed by changing trading rules. Do you think there's any incentive by the public to actually push for a regulation that would – I think so. I think millisecond trading doesn't have any particular advantage. So. I think the history of Western civilization is we do these sorts of things. We're capable of making changes in rules. Now there's gonna be someone who really opposes it, someone who just installed a fiber optic cable that's straighter than any other one. Does it have to be done by the government for like — Oh, it doesn't have to be done by the government. It can be done by the exchanges. The exchanges make their own rules. The members vote. So, if you are a member, most members on the exchange don't benefit from millisecond trading, and they could vote to change the rules. Do you think high frequency trading contributes to efficient markets or has nothing to do with efficient markets? Well, it makes the millisecond efficient, but only computers can see it. Yeah, I don't consider this one of the top issues facing the world today, because it's only measured in billions of dollars per year that sucked off of investors by millisecond traders. It doesn't compare with other issues facing the world today.
