> Seems completely pointless to me. At that would happen is that a new
> derivative would be created where someone promises to sell shares for at a
> particular price now and you will sell the same amount to them in a hours
> time. Shares are fungible. If you have 1000 shares in X and you buy 100
> now and sell 200 the next second, have you sold the same shares or
> different ones?
Well, you could imagine a system where trades are only possible every 60 minutes. Presumably everyone would submit his order, and they would all get executed at once. I guess people could always choose to trade their shares on a dark pool or something, though.
Apparently the SEC has publicly declared that high-frequency traders had no part in the 2010 Flash Crash.
> The problem is not the trading itself, it's people taking risks they
> shouldn't. This is a social problem that will not yield readily to a
> technological solution.
Well, there's really a few different problems that caused the credit crunch. The first, and probably most serious, is that the U.S. government allows asset bubbles to form and explode without doing anything. Whenever China's stock market starts overheating, they introduce new regulations, start limiting price movements, etc until the problem is under control. Similarly, with property prices, China takes steps to keep them from overheating. For some reason, it's accepted wisdom that the U.S. government has to intervene when things are bad, but not keep a lid on things when the economy starts overheating. It's weirdly asymmetrical.
So we had kind of a "finance bubble" in general. The whole business of moving around money became one of the hottest sectors of the economy, much like computer technology in the late 90s. Exotic derivatives were developed-- what Warren Buffet called "financial weapons of mass destruction." In a lot of cases, human judgement was replaced by computer heuristics and algorithms developed by "quants."
The results, I guess you can see. But it wasn't greed or excessive risk-taking that caused the problem. Just a regulatory and conceptual failure. Remember, it's possible for everyone to act rationally, and yet to end up with a deeply irrational outcome.