Advisors, portfolio managers and the investing public are rightfully frustrated with the effect that high-frequency trading (HFT) is having on the markets. We have been discussing this with clients for years now and without getting into the details of different HFT strategies, the key point is that HFT allows certain traders to "game the system" and earn a small profit on each trade without taking any risk. This cost is similar to a tax, which is ultimately paid by the investing public for limited to no value. This tax is nothing more than a transfer of wealth from everyday people to a select few - and it adds up to billions of dollars a year. It hurts the average individual investor and, ultimately, the public's confidence in the markets. It can take a long time to build confidence and when it is lost, we all lose.
We wanted to make our readers aware of an initiative that could help level the playing field. A group backed by a number of institutions (including CI Investments, RBC and others) is seeking to launch a competitive exchange named Aequitas. This exchange would 1) create additional competition and 2) operate in a way that prioritizes fundamental trade orders over high-frequency trades.
We like the principle of what Aequitas is aiming to achieve and believe the benefits outweigh potential concerns. For this reason, Cambridge has decided to support this initiative. The OSC has published a request for comments and we have made our opinions known. If after conducting your own research you wish to support the cause, you may complete the following survey or letter of support:
We believe Aequitas is a step in the right direction.
Disclaimer: Cambridge Global Asset Management is a division of CI Investments Inc. ("CI"). CI's parent company, CI Financial Corp., is a shareholder of Aequitas.