HFT? Forget about HFT, it's now..HIT.

Forget HFT; “High Intelligence Trading” is the new frontier for technology, markets, regulation

By Guest Contributor APRIL, 2014

NEW YORK, Apr, 2014 (Thomson Reuters Accelus) - While fast is good, smart is better, and with untold resources of computing power and memory banks in the clouds, the new frontier in electronic trading combines sophisticated intelligent software with rapid-fire processing, enabling traders to stay one step ahead of the regulators.

“What’s the difference between pure speed and adding intelligence to that speed?” asked Terry Keene, head of iSys, a technology integration firm, at a conference focused on high performance computing. The answer is “big data analytics” that brings decision-making and trading to a “near-time” environment, he added.

“Over the past 18 months people started to understand data,” said George Kledaras, chief executive of Fix Flyer, a technology company with a focus on the FIX protocol, a long-standing communications standard developed for securities transactions and markets.

“If I can predict that I can be the first in the (trading) queue 80 percent of the time, that’s good enough,” he added. “I don’t know if it’s illegal, or whether the government will make it illegal.”

From a regulatory perspective, participants at the conference believed that attempts to limit trading firms from using such tools to their advantage was likely to be a losing battle, with advances in software outpacing the ability to understand how they were applied.

“You are not going to stop them,” said Keene of iSys. “It’s not going to stop. It’s an ecosystem that keeps evolving.”

http://blogs.reuters.com/financial-...w-frontier-for-technology-markets-regulation/

How can the average Elitetrader win?

 

the question is-how did you get there(on front of others)?
if you are not sure,if it's legal or not-it's sounds fishy already to me. because back to old days-there is only few things involved in that line-price,size and time. in that order.
don't sell me evolving.ecosystem and other fancy cr**
why they can't just simplify the things instead?

 

Trading firms and hedge funds used to love hiring sports people. Aggressive and competitive guys. That is now over.

The nerds, the super computers will now rule the trading world. It's either adapt by growing another super brain or be weeded out by superior intellect with super cognitive abilities measured in the milliseconds.

 

This guy is not a trader, nor is he trading. He is a technologist. Not knowing the answer to that is a reasonable response. He is probably covering his butt.

 

That warms my heart immensely. Inventor and software writer here... It has been OBVIOUS to me for about two decades that the man for the job is a computer. The true "killer app" is being written somewhere. Somebody will make more money from the computer than Bill Gates. Could be me but I exhausted myself working on that, took a hiatus that so far has gone for the better part of a year. Not sure I'll ever get going on it, you get to a certain age and money doesn't matter that much...

 

Clearly it is not illegal to be first in line, trade or use skill to trade or compete. It should be illegal that someone else is given preferential orders, preferential information, or preferential treatment in a market place that is itself a infrastructure commodity. Brokers have been made obsolete by the internet and yet they still act as though they still provide a service that has long gone the way of the dodo.

The market can and will deal effectively with unfair trading in the long run by diminishing the advantage through time. (efficient market theory). Clearly it can't deal with inefficiencies caused by built-in " fair market rules" that only serve to benefit those on the infrastructure inside. Sadly, those firms will have to find another business that adds real value to society rather than wringing their hands and crying on TV about all the "value " they add for their built in fees.

To say that we have finally understood big data is laughable. 20 years ago we worked on big data products that ultimately failed because to most data and information are the same thing. The same quotes were used back then.

Let us all compete on a level playing field. Same access, same order types, same fees, same everything. If not, then how can we convict SAC of insider trading but not certain HFT practices? Does this really mean that insider trading is only meant for those who are deemed as "shouldn't be insiders", while others are providing "liquidity", unless they lose money. (Socialism {Animal farm - some animals are more equal that others} or competition? )

I think the entire capitalist system is being destroyed because the big guys don't want to risk and fail and lose money. (TBTF) I see evidence everywhere, yet those in power seem not to see it or care. Ultimately we either fix it, or the entire system will fail and we will all start over as the risk signals are being hidden. One can pass laws against tornados, but who believes that laws will save them in a storm? Apparently our "leaders" do believe that.

As for specialty data analysis, I pointed this out to the best trader I personally know when I mentioned HFT to him several years ago. (He asked me what I thought the longer term implications were.) I didn't post on ET but there are methods for separating noise from information. I pointed out to him where the end game was. At first he was skeptical, but a few months later, he adjusted his methods based on his own research. The last contact about that with him, when I asked about HFT, he wrote back that the acronym was wrong it should be How we F*** Them. I had a great belly laugh at that one.

Keep the playing field level and firms can use all the intelligence they want to.

 

Please allow me to laugh - this is another pathetic attempt to try to create another buzzword. Why not giving the inventor of this concept the Noble Prize for also discovering that humans have brains? *LOL*

 

With enough data in the cloud that can be deciphered by super computers, it is possible to find that optimal entry point. If your data can do that, you can place huge orders at that price and since you were in before most, you get filled on the whole order. This would push retail traders to get filled at a worse limit price, at market or not at all.

Ironically, I don't think this is wrong (even though I may be at lose to this). It is just like when someone has enough backtested data (let's assume it works and has a defined edge) and uses it to his advantage. He has put in the time and effort into extracting that data. If so, why should he not have an advantage over you.

In terms of legality, I think it is only illegal, if, they stop you from using your own research to your advantage. Everyone is allowed to use all tools to get that edge. Hence, you either take the time and effort, along with a huge financial input, to join them or be on the side that is less fortunate. I know that I can not compete with them on time and financial input, so I very comfortably sit aside as a disadvantaged. It may cost me $0.02/4 to enter my trade, but it is now up to me to tweak my strategy to be able to compete.

I know it's not fair, but life is not fair.

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Laws are determined by men. If you are a small trader and capture an anomaly to your advantage, guess what? SEC makes it illegal. If you are a corporation with deep pockets and friends in the SEC, nope nothing illegal about that. Just superior technology and intelligence.

 

Laws are determined by men. If you are a small trader and capture an anomaly to your advantage, guess what? SEC makes it illegal. If you are a corporation with deep pockets and friends in the SEC, nope nothing illegal about that. Just superior technology and intelligence.[/QUOTE]

Grandluxe, I completely agree with you on that. Your profile says you are from Nigeria. If that is true, then I am sure you have seen the rags to riches story many times over. For now, I have to accept where I am and accept the scraps (which make a decent living) whilst I persist.

"Just superior technology and intelligence."

Very well put.