No one has ever seen an enviroment like this in 80 years. HFT is a natural respone to a very risky environment that has become even more risky and confusing because of government intervention into the economy and financial markets. If you are GETCO, Tradeworxx the exchanges are allowing you free money but the amount of longerterm participants keeps shrinking which is causing the margins to erode.
IMO high frequency trading is more a natural response to increased electronic exchange access opportunities as well as the increased availability of capable and relatively inexpensive software platforms and toolboxes. Every year seems unique and different than the past 80. If you recall the crash of '87, the tech bubble, 9/11, the real estate bubble; there were periods of confusion and chaos that only ebbed away through the lens of historical context. The trader who grows some stones and finds new emerging strategies and trends in the rubble and confusion makes the money. If you are a relative value trader who measures his holding period in terms of minutes or hours and not seconds the HFTs and MMs have absolutely no bearing on your strategy. None. Regardless of your strategy you will not make it in the trading business if you choose to compete with MMs and HFTs.
something is seriously wrong w/you people. my post is not about leaving the business ... it is about the manual prop trading business as a whole. i don't need to work anymore though i still enjoy it. the post is made to get feedback on the present situation. everyone seems to just have a pole up their bum, trying to make unnecessary personal points. ok, you are great, and bravo to you, we're all poud of you. it's not about me...it's about the current environment.
I think the majority of traders have adapted. I'm a hedged trader so my timeframe was beyond the standard 'day-trade' although I would like to see my daily volume increases I'm not gonna fight something that isn't there.....what I don't think you or the other critiques of this thread realize is why we're bitching; the majority of the trading that's being conducted is in a lot of cases unethical/borderline illegal. I have a tough time distinguishing between what's going on and front running, like those crooked specialists which are now in jail.
My best guess is the government messing around with huge deficits, asset gurantees, asset purchases has left everyone in the dark about what to expect next. Until we get Summers, Bernanke out of there nothing will be stable.
IMO, the current environment is automated trading. if you have a real strategy then it can be automated. the guys who sit, stare, and click are a joke. they are just playing slots and for some reason never research or track anything.
No this comment was not directed toward you, the risk free strategies i'm referring too doesn't apply to anyone on elitetrader. I think you're really missing the point....the crash/direction of the market was not was I was referring too, I'm talking about the abuse of the system. For people that are comparing MMs or specialists to some of the HFT firms out there really don't understand what's going on. The flash orders and subpennying that are very profitable to a select few are RISK FREE strategies and to say well the MMs had something like that, the difference being those guys actually provided a market. As crooked as specialists were they still maintained order flow, they didn't leave the floor of the NYSE when things got ugly. If you guys think what is going on right now is comparable to anything in the past, how can you explain the trading revenues generated from some of the banks....didn't GS just have a quarter where they never had a single losing day in the history of their trading desks? 100/mil a day for how many days? I'm not exactly sure what it was, I'll have to dig around, but the fact remains this system is ridiculously lucrative and that money is coming from someone.
Actually, I can explain the trading profits, and if you can't, you really aren't qualified to even hold an intelligent discussion on the inner workings of an investment bank because you have no clue how a trading desk operates. You do realize that the VAST majority of their trading revenue comes from their fixed income desks, right? You do realize that a huge portion of the corporate market, both above and below investment grade was trading at distressed levels at the start of the year. And I'm sure you realize that when trading debt at distressed levels the bid-ask spread widens to compensate for the added risk. And based on that knowledge, I'm sure you're also aware that when you can buy at the bid and sell at the ask, and the spread between the two is measured in multiple points, the result is lots and lots of profits at basically zero risk unless inventory is involved. And when you combine the above with a market that is rallying beyond belief (to levels not seen since before the credit crisis) along with a new issue calendar that has done a moonshot compared to the year previous, you have the recipe for an absolutely perfect trading environment where anyone not making money should be fired on the spot.
Best post on this thread. You know I read through some of the posts on ET from time to time and it seems that 99% of the people on here don't even realize a fixed income market exists. The fixed income market dwarfs equities by mutiplies of 10. I would venture a guess that less then 5% of GS revenues come from the equity universe. In fact the equity divisions of most investment banks are the lowest paid people and usually considered bottom fry. The real money is in fixed income for those banks both in high grade and low grade debt. My guess is the only reason any bank even bothers with an equity desk is to caputure order flow info that can probably benefit some other division of the bank.