The Rise of High-Frequency Traders, and Where the Market's Getting Liquidity

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I recently met up with longtime New York Stock Exchange floor trader Doreen Mogavero at the NYSE. In this video, Mogavero responds to my question of whether we've become too obsessed with the idea that markets benefit from more liquidity. Have a look (transcript follows):

Morgan Housel: When I think about that prior to the high-frequency trading era, I don't recall stories about lack of liquidity, people trying to buy stocks in the 1990s and there wasn't enough liquidity. Do we over exaggerate the benefits of liquidity?

Doreen Mogavero: No, I don't think you over exaggerate the benefits of liquidity, but the market dynamics have changed, the market demographics have changed. Someone is always providing liquidity. Who that might be changes from time to time, right? It was hedge funds for a while; now it's high-frequency traders. Retail investors currently are not in this market, at least not in a huge way. So someone has to provide liquidity, and currently, high-frequency traders are doing that. They are a big part of how much trades here on a daily basis, but trades in the entire marketplace, not just here. So they are providing liquidity, and I'm a free market person, so you're asking the wrong person to say something bad about liquidity because I like liquidity and I like everybody to participate. 

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The article The Rise of High-Frequency Traders, and Where the Market's Getting Liquidity originally appeared on

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