Question

In your own words, explain flash trading and dark pools. Do you think they are fair? Why or why not? How should the government regulate them?

In your own words, explain the role of fannie and Freddie in the housing market.

Answer 1

Flash trading is a concept offered by some exchanges, where through the use of high speed computers we an see what buy and sell orders are being placed at the terminal. Being looking at the size of orders placed, before this information becoming available to anyone an individual can gauge what the market sentiments are. Using the information, they can trade and make a profit.

Dark pools are block trades places by the institutional investors who do not wish to change the market movements by the  large size of their trades. These are private exchanges or forum to carry out transactions.

No, these platforms are not fair, as trading should be carried out in a fair and transparent manner as the hard earned money of people are invested and a few people gain at the cost of such investors. The government should regulate, to prevent such transactions from taking place and protect the interest of the investors.

The role of Fannie and Freddie in the housing market ;

• They provide the liquidity, stability and transparency to the mortgage market , with the help of these measures they can provide mortgages to the housing market very easily and at affordable rates of financing.
• They stimulate the housing market by making loans available to the middle and the low income groups.