High-speed traders make money off the back of small investors without taking much risk themselves, a top U.S. government researcher found, potentially posing a setback for the sector as regulators consider tighter rules.
High-frequency trading firms (HFTs) earn large and persistent profits, according to a study by the chief economist at the Commodity Futures Trading Commission (CFTC), the powerful U.S. derivatives regulator.
"HFTs derive their profits from fundamental and small investors," Andrei Kirilenko said in slides he first presented at a conference on Friday. "HFT profits increase in aggressiveness."
The study, which Kirilenko had written together with two academics outside the CFTC, presented the views of the trio of authors and not necessarily those of the CFTC, its commissioners, or its staff.
The CFTC said the study is still under peer review, a common process for academic papers in which other researchers critique a publication before it goes to print.
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