High-frequency trading firms are fighting to fend off regulation as scrutiny of their practice of unleashing blizzards of orders coincides with repeated technical glitches in the markets, the Wall Street Journal reported today. As the firms work to convince policy makers their practices are benign or even beneficial, one of their primary tools has been research seeded by the industry itself, promoted by lobbying that has increased in recent years. Defenders say high-frequency trading keeps markets lubricated with a constant supply of buy and sell orders that enables all participants to trade more efficiently and get better pricing. Critics worry that the traders' order torrent makes markets more opaque, less stable and ultimately less fair. Concern has risen amid a lengthening list of unnerving market malfunctions: the "flash crash" free fall in May 2010, the bungled initial public offering in March of a computerized stock exchange, the poorly executed Facebook Inc. public offering in May on the Nasdaq Stock Market and Knight Capital Group Inc.'s August debacle.
