High Frequency Trading: An Ethical Dilemma

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From the perspective of the companies providing high frequency trading get technology to the large banks there is great incentive to do so. These companies profit greatly from the sales they make to the larger firms, but are not directly affected by the consequences of high frequency trading regulation. This creates another complicated scenario. These tech firms are being criticized far less than the large banks, but are clearly a contributor to the issue. While they are well within their right to manufacture and sell their technology to whoever is willing to buy it, their product is cause for much disagreement. These firms would use a right based ethical approach to defend their actions. On the contrary, one could argue that their technology is providing good for only a select number of people, which would clearly contradict rule utilitarianism. Although minor players in the financial markets, the companies supplying these types of technology must also be analyzed through an ethical lens.

In order to find a true ethical solution to this case, one must assume that not all stakeholders best interests will be considered. The most likely scenario to level the playing field will be regulatory implementations that limit the use of high frequency trading. For instance, regulators may limit the amount of trades firms can make per day using high frequency trading systems or may discourage making large numbers of trades through these systems by placing fees on each high frequency trade. Ultimately, high frequency trading is a very complex ethical dilemma. It is clear that discussions are needed surrounding the issue and through those discussions it is hopeful that a adequate compromise can be reached..