Hi-Frequency Less Frequent

Discussion in 'Automated Trading' started by doublechin, Apr 13, 2011.

  1. UK PRESS: Low market volumes and stiff competition have led to a sharp
    fall in "high-frequency" trading as industry experts warn that the past
    two years of rapid growth may be coming to a halt, the FT reports.
    Instead, high-frequency traders are flocking to emerging markets such as
    Russia, Brazil and Mexico where exchanges are beginning to revamp their
    systems to attract such players, the paper says
  2. Larry Tabb, chief executive of Tabb Group, a consultancy, said high-frequency trading now accounted for 54 percent of overall US equity trading, down from an earlier Tabb estimate of 61 percent in 2009.

    The level in Europe fell from 38 percent last year to 35 percent, although Tabb is expecting a small uptick towards the end of the year.

    “We haven’t been seeing any big names blow up but it’s more about people downsizing. And we’ve seen some people get out altogether.”

    A technological arms race is also hurting profitability.

    Peter Nabicht, executive vice-president at Allston Trading, a Chicago-based proprietary trading firm, said: “It is getting harder. You’re seeing competition expand like crazy and we are taking a big hit on our margins because of the investment we make in our systems. I wouldn’t be surprised to see some HFT firms being bought.”

    He added that the growth of “dark pools” and other private networks where prices are not displayed publicly had reduced trading opportunities.

    “We have less flow to interact with so the flow we interact with we have to handle better.” Robert Hegarty, global head of market structures at Thomson Reuters, said that high post-trade costs in Europe relative to the US was “a significant inhibitor to growing this [HFT] business”.

    Rutger ter Hoeven, marketing manager at Interxion, which runs data centers where high frequency traders can put their trading systems, said profits were down at many trading firms based in Amsterdam, the largest community of HFT firms in Europe outside London.

    “In Amsterdam we’ve seen some of the market-makers come under pressure,” he said.

    One such firm, Alpha Bay, went out of business in recent months while one of the largest options trading firms, All Options, has left the floor of the Amsterdam Stock Exchange, where it based its electronic trading, and has cut staff.
  3. Occam


    Thanks for posting that, doublechin. It's not too much of a surprise, considering how much tighter spreads have gotten, how much volume+volatility have declined (in many markets), etc. It's just a really competitive market (in both HFT and not-so-HFT), and it looks to to get even more competitive going forward.