Part 3/10:
At the center of this automated landscape are firms that position their trading hardware as close as possible to stock exchange servers, enhancing the speed of their transactions. The concept of "collocation" allows these traders to exploit minute price discrepancies, often buying stocks from exchanges and selling them immediately at a higher price to institutional investors like pension funds.
High-frequency traders thrive in volatile market conditions, profiting from crises and unpredictability rather than long-term investment strategies, which the stock markets were originally designed to support.