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WSJ: Human-Based Stock Trading Remains Popular

By    |   Tuesday, 29 July 2014 12:11 PM

The prevailing view is that lightening-fast electronic stock trading is rapidly pushing aside human traders.

After years of fast growth, computer-based trading appears to have leveled off, according to The Wall Street Journal.

Human-based trading, or high-touch trading, may even be enjoying a slight increase in popularity. Real live humans continue to trade stocks by instant messaging or even making phone calls.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

Stock trading by people communicating directly with each other fell from 57 percent in 2011 based on dollar volume to 55 percent last year, the Journal reports, citing Greenwich Associates.

Electronic trades, especially large blocks of stocks and deals in low-volume markets, can attract attention and cause the stock prices to jump. Trading volumes fell to their lowest levels in seven years, the Journal reports, citing data from Credit Suisse.

"The noise you make in a stock is just a little bit louder," Shaun Neumann, a trader for Westwood Holdings Group told the Journal. "Without a doubt, that's caused the trading to change a little bit."

Although some computer programs can split trades into smaller orders and spread them out over time, the programs leave tracks others traders can spot, sometimes forcing investors to buy higher or sell lower.

"As liquidity decreases, the attraction of high-touch trading increases," Michael O'Brien, director of global trading at Eaton Vance Corp., told the Journal, saying the firm has done more high-touch trades in recent years.

Experts say electronic trades cannot provide investors the insight into stock trades that humans can provide.

Some investors are also concerned about high-frequency trading, flash crashes and dark pools which post little information on trades.

High-touch trading helps investors "stay away from some of this toxicity,"
says David L. Brooks, head of global equity trading at Boston Company Asset Management LLC, according to the Journal.

New York State Attorney General Eric Schneiderman has filed a lawsuit against Barclays, alleging it tricked investors for the benefit of high-frequency traders, reports the New York Post.

Barclays filed a motion to dismiss the suit. "Fundamentally, the complaint fails to identify any fraud — establishing no material misstatements, no identified victims, and no actual harm," the motion states, according to the Post.

Schneiderman alleges the bank employees quit or were fired for refusing to lie to clients about how much volume went into its own dark pool.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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The prevailing view is that lightening-fast electronic stock trading is rapidly pushing aside human traders.
stock market, human, traders, people
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2014-11-29
Tuesday, 29 July 2014 12:11 PM
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