high frequency trading
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High-Frequency Trading Is Evil, Right? Not So, Says the BIS - The Source - WSJ
Everyone knows that high-frequency traders are the evil geniuses of the foreign-exchange market, right? They damage liquidity, swoop aggressively on tiny price errors, curdle milk with their oh-so-fancy computers and generally make the market harder for everyone to navigate. A new study by the BIS, based on research from officials at some 14 central banks, says that high-frequency traders (or HFTs in market speak) smooth out currency movements, help spread liquidity around this fragmented market and help to make trading cheaper for everyone. HFTs do raise big questions, the BIS said. They barely existed 10 years ago, and now, their impact on the market as a whole is still not fully understood.Exclusive: Regulators seek trading secrets | Reuters
WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes. The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA's market regulation unit. "It's not a fishing expedition or educational exercise. It's because there's something that's troubling us in the marketplace," he said in an interview. The Securities and Exchange Commission, meanwhile, has also begun making requests for proprietary algorithmic trading data as part of its authority to examine financial firms for compliance with U.S. regulations, according to agency officials and outside lawyers.
Algorithmic Trading is Not High Frequency Trading
It’s not every day I come across a widely-shared article whose first sentence is factually incorrect, but a 9/9/11 story in Computerworld UK, “Algorithmic stock trading rapidly replacing humans, warns government paper” , is just such a creature. The first sentence begins, “Algorithmic trading, also known as high frequency trading ( HFT ), is rapidly replacing human decision making, according to a government panel…” Algorithmic trading is like the GPS navigation system in your car: you tell the car your destination, and the GPS picks the route.
Mathematicians and their trading programs are increasingly taking the place of professional investors in financial centres across the world Trading floors were once the preserve of adrenalin-fuelled dealers aggressively executing the orders of brokers who relied on research, experience and gut instinct to decide where best to invest. Long ago computers made dealers redundant, yet brokers and their ilk have remained the masters of the investment universe, free to buy and sell wherever they see fit . But the last bastion of the old order is now under threat.
BBC News - Quant trading: How mathematicians rule the markets
[2011] Man vs. Machine on Wall Street: How Computers Beat the Market - Business - The Atlantic
Wall Street, meet your post-human future. Uber-"quant" Cliff Asness bets that his high-speed computers and trading models can churn billions of dollars in profits in booms and busts alike. But can artificial intelligence really out-smart the market? With the winter's second blizzard raging outside, Cliff Asness sat in his relatively modest office in Greenwich, Connecticut, surrounded by three of his partners, his PR guru, an impressive collection of unread books, and a sea of foot-tall hard-plastic replicas of Spiderman, the Incredible Hulk, and friends. "Let me be technical," he said.
A new paper on high-frequency trading
The author is Jonathan Brogaard of Northwestern and here is the abstract: This paper examines the impact of high frequency traders (HFTs) on equities markets. I analyze a unique data set to study the strategies utilized by HFTs, their profitability, and their relationship with characteristics of the overall market, including liquidity, price efficiency, and volatility. I find that in my sample HFTs participate in 77% of all trades and that they tend to engage in a price-reversal strategy. I find no evidence suggesting HFTs withdraw from markets in bad times or that they engage in abnormal front-running of large non-HFTs trades. The 26 high frequency trading (HFT) firms in the sample earn approximately $3 billion in profits annually.
[2010] High Frequency Trading and its Impact on Market Quality by Jonathan Brogaard
A main concern regarding the recent development of high frequency trading (HFT) is its relationship with volatility. HFTrs' level of activity changes with the level of volatility. The direction and magnitude of the change varies across the time horizon of interest and type of HFT activity. Studying the causal link between volatility and HFT I show that increased stock specific volatility causes HFT firms to reduce their aggressive activity. The reverse is true for macro volatility.It sounds like something out of The Matrix: a giant, world-spanning electronic network where high-powered machines, some of them using GPUs to gain a speed advantage, run secret, rapidly-evolving software algorithms that battle it out for profits in a high-stakes game of cat-and-mouse, attack-counterattack, that yields some $21 billion a year for the winners and can spell ruin for the losers. Except that it's not The Matrix —it's the stock and commodities markets, and the fact that these markets mainly consist now of computers trading against one another has been brought closer to the public's attention by last month's alleged theft of Goldman Sachs' proprietary trading code.
The Matrix, but with money: the world of high-speed trading
Wall Street Computers Read The News Before Trading | Singularity Hub
Singularity Hub might be affecting the way stocks are traded on Wall Street. So could a lot of blogs. And Twitter feeds.
Survey: High-Frequency Trading Has a Bright Future | FINalternat
By Irene Aldridge -- High-frequency trading has grown exponentially in the past several years, and, according to the FIN alternatives 2009 Technology and High-Frequency Trading Survey, that growth is here to stay. A whopping 90% of respondents think that HFT has a bright future. In comparison, only half believe that the investment management industry has favorable prospects, and only 42% have a positive outlook when it comes to the U.S. economy.Goodbye High Frequency Trading - Regulators Seek Secret HFT Codes | ZeroHedge
The crusade against High Frequency Trading which Zero Hedge started well over two years ago , is now coming to an end. Reuters reports that U.S. securities regulators have " taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes. " As everyone knows, the only thing of value within the sub-penny scalping HFT universe are the odd nuances in computer code. Which is why its supreme and undisputed secrecy is sacrosanct.Goldman's $4 Billion High Frequency Trading Wildcard | zero hedge
A recent story in Advanced Trading goes after some of the minutae of High Frequency Trading and provides a glimpse of the total value that HFT may provide to behemoth PT powerhouses such as Goldman Sachs. The article presents a very valuable perspective on just why HFT is so critical these days, especially when cash traders go for 6 hour Starbucks breaks between 10 am and 3:30 pm: "high frequency trading firms, which represent approximately 2% of the 20,000 or so trading firms operating in the US markets today, account for 73% of all US equity trading volume. These companies include proprietary trading desks for a small number of major investment banks, less than 100 of the most sophisticated hedge funds and hundreds of the most secretive prop shops, all of which operate with one thing in mind—capture profit opportunities by being smarter and faster than the closest competition."Today's stock market has become a world of automated transactions executed at lightning speed. This high-frequency trading could make the financial system more efficient, but it could also turn small mistakes into catastrophes. In a hurry: Manoj Narang, founder and head of Tradeworx, buys and sells millions of shares every day, using algorithms that often execute thousands of trades per second. Credit: Steve Moors Jump to I f Manoj Narang is about to bring down the markets, he's certainly relaxed about it.