High-frequency traders often confound other investors by issuing
and then canceling orders almost simultaneously. Loopholes in market
rules give high-speed investors an early glance at how others are
trading. And their computers can essentially bully slower investors
into giving up profits — and then disappear before anyone even knows
they were there.
High-frequency traders also benefit from
competition among the various exchanges, which pay small fees that are
often collected by the biggest and most active traders — typically a
quarter of a cent per share to whoever arrives first. Those small
payments, spread over millions of shares, help high-speed investors
profit simply by trading enormous numbers of shares, even if they buy
or sell at a modest loss.