You're watching...
Chapwood Capital Investment Management’s Ed Butowsky on the impact of high-frequency traders on the markets.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
While the markets triple digit swings in May under even -- season investors.
One perpetrators is scoring record profits a -- Wall Street Journal high frequency traders those -- in -- fractions of a second.
They're the guys -- -- a big bucks off of the volatility.
And that's leading many to speculate that there really to blame for the wild gyrations we've seen lately.
But my next guest says -- traders are not the costs recent market volatility they are definitely contributing to the instability he's managing partner chat with capital investment.
Management he's -- tasking so you say the flash traders are not to blame for the volatility -- -- in case.
Well -- -- partially to blame so we put in perspective the computers are to blame for what we've seen.
A high frequency trader is literally buying and selling literally in forty milliseconds.
And they don't really care if the market's going up for the market's going down they're creating and basically buying and selling a very small little arbitrage that might sell and buy and buy and sell.
But -- you cannot even look when you look at the time stamp of the buying in the sale it happened so fast they can't literally detect the time -- Sarah -- a lot right now I don't think they're responsible for what two thirds of that they're trading isn't that right up what's going down on now on Wall Street now -- -- -- if they say it.
Well there's a lot there's a lot at the where the problem is in the news on the volatility is the other side of the computer trading.
Which are those who are just literally selling in a lot of cases selling without borrowing the shares they're shorting stocks and they're not buying it back -- just shorting and shorting and it's shorting it.
And then all of a sudden will get.
We'll get some sort of indication and then the -- turn around start buying again that's different than the high frequency traders I think the SEC is focusing on the wrong group it's the short seller of siren -- don't you out and talking about and naked short selling.
But I think that air.
-- -- Basically percent of penetrate that they're -- a fractional compared to what the flash traders are engaging right.
What will we will see OK I mean that's yet to be determined but there's still a lot of program trading is going on even if they're borrowing the shares are not part of the shares.
It's computers that have taken over the treaty and the aftermath.
Is tragic the aftermath is people are sitting on the sidelines afraid to invest when they need to be investing especially when the market.
Loses 30% undervalued based on expected earnings this is a tragic story that's unfolding right now.
-- so here's the deal I mean they would.
People are worried they're worried about their standard of living up their retirements are worried about the 401K accounts.
And we have Fox Business -- we're getting their backs as much as they can but -- -- of the robots and there and you have skittish herd behavior.
The question it might be for the SEC should they start with speed limits on the flash traders.
I don't know if they can put speed -- -- I mean we've we've we will was up question how much government we want involved what we need to do is educate the people were watching right now to understand that stocks normally trade based on fundamentals the values of companies but every once and a while that ugly thing comes in those computer trades when that happens.
Take a deep breath relax the fundamentals will bring it back again and people need to get invested because they're losing purchasing power sitting on the sidelines you know that and I know that right all right thank you -- -- so good to bid a thank you so much for your time.
