Page last updated at 06:03 GMT, Tuesday, 3 November 2009

Myners' super-fast shares warning

Lord Myners
Lord Myners fears HFT risks the investor - company relationship

Companies could become the "playthings" of speculators because of super-fast automatic share trading, Treasury minister Lord Myners has warned.

The peer, a former fund manager, told the BBC this was one of the main dangers of such a system.

High-frequency trading (HFT) is automated dealing where shares change hands, frequently in microseconds.

Lord Myners said the process risked destroying the relationship between an investor and a company.

HFT is based on computer programmes which, in effect, remove the human element from share transactions by searching for trends in the market and trading automatically in a fraction of a second.

Listen to File on 4, BBC Radio 4 2000 GMT, Tuesday 3 November 2009, repeated 1700, Sunday 8 November 2009.
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It is estimated that HFT has risen sharply in the USA and now accounts for up to 70% of all share trades and is rising rapidly in the UK and Europe.

But Lord Myners told the BBC's File on 4 he already had doubts about this development.

"I have been increasingly troubled that we seem to find ourselves in a situation in which shares are to be bought and sold rather than being part of an ownership relationship between investor and a company," he said.

"The danger is that nobody really seems to think of themselves as owners."

Speculator fears

Lord Myners said that investment bankers said HFT was good for investors as it "drives down the cost of capital".

However, the financial services secretary added: "I think the fact that people can own shares for nano-seconds seems completely divorced from the concept of a joint stock company and distributed share ownership.

"The danger is that companies become the playthings of speculators."

The peer fears that this process denies capital to businesses which should be the main aim of share trading.

"It has gone too far, it has now lost its supporting function for the provision of capital to business and has become a game to be played."

File on 4 is on BBC Radio 4 on Tuesday, 3 November, at 2000 GMT, repeated Sunday, 8 November, at 1700. You can also listen via the BBC iPlayer after broadcast or download the podcast.

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