Information Traders Must Be Compensated

I'm still in the thick of exams week (one to give today, one Friday, and one Saturday), and they're not all written yet. But this piece from Burton Malkiel in FT.com was worth highlighting. The best part was the last paragraph:

As de facto market makers, high-frequency traders can exploit pricing anomalies and pick up pennies at the expense of other traders. Such activities are not sinister. The paradox of the efficient market hypothesis is that the people whose trades help make the market efficient must be compensated for their efforts. As former SEC Chairman Arthur Levitt has written: “We should not set a speed limit to slow everyone down to the pace set by those unwilling or unable to compete.” High-frequency trading networks let large and small investors enjoy a more efficient and less costly trading environment.

Read the whole thing here.

HT: Abnormal Returns