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According to Baumann, high-speed trading is a practice which executes trades for large amount of times in very short period of time. Baumann cites the opinion of Mary Schapiro, SEC’s chair, which indicates that the fault of high-speed trading could cause disaster, such as the unusually huge price fall in stock market. Baumann states there are serval problems that show high-speed trading is dangerous and risky.

Baumann indicates one of the problems makes high-speed trading risky is that it prevents investors from the real market information. According to Baumann, Schapiro states that 4 percent of the quote activity in US stock market is caused by high-speed trading. The high-speed trading, however, actually does not do a single trade. Also, Baumann indicates a fact that the investment nowadays often comes to the companies based the purchase and offload speed, not the real worth of the companies. This shows that the high-speed trading, even though may not executes trade actually, could confuse investors when they make the decisions on investments.

Furthermore, Baumann states that another problem is people depend too much on high-speed trading computer programs. Baumann cites Brent Weiseborn, a former NASDAQ vice president, who notes that computer programs do not know how to judge and thus might cause disaster once it is beyond control. Baumann also illustrates an example that Knight Capital, a financial firm, suffered a huge loss from incapable of controlling the disordered computer programs. It is too much dependence on computer programs that makes people unfamiliar to those programs. So once programs are out of control, it could take long time before the problems solved. This proofs that too much dependence on the computer programs makes high-speed trading a risky practice.

Baumann also points out that lack of regulating the high-speed trading also makes it a dangerous practice. According to Baumann, Gregg Berman, a SEC adviser studying the problems caused by high-speed trading, states that even though regulators can rebuild the problems occurred in market, they can do nothing to those problems at the same day. This is because the regulators can only receive the trade information until 8 am next day, not at the real time. Also, Baumann indicates that the method like kill switches, which could shut down the stock market when the price swings unusually, to solve the problems of high-speed trading can hardly be executed, since nobody wants to be responsible for judging when to use it.

Moreover, Baumann believes that future potential problems of high-speed trading also make this trading a risky behavior. According to Baumann, computer scientist John Bates worries that the algorithmic program he designed for high-speed trading might causes problems like unusually huge price crash in stock, if someone intends to do so with the program in future.

Baumann concludes problems of high-speed trading, which are preventing people from the real market information, too much dependence and lack of regulating of the stock market. These problems indicate that high-speed trading is risky and dangerous.

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