The European Central Bank (ECB) has released a working paper defending high frequency trading (HFT), saying that it helps with more efficient price discovery because HFT on average trades against transitory pricing errors. ECB defending HFT “Our analysis suggests that HFTs impose adverse selection costs on other investors. At the same time, HFTs being informed allows them to play a beneficial role in price efficiency by trading in the opposite direction to transitory pricing errors and in the same direction as future efficient price movements,” write Jonathon Brogaard, Terrence Hendershott, and Ryan Riordan for the ECB. When institutional investors make…