Charles Davì

High Frequency Trading

In Uncategorized on February 18, 2010 at 12:04 am

All,

Jeremy Grant of the FT has put together a fantastic article on algorithmic and high frequency trading. Unlike all the hype and nonsense floating around on the subject, Jeremy’s article is a refreshingly in-depth, yet approachable piece. I highly recommend you take the time to read it.

Regards,

Charles

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  1. I find it amusing that the closing paragraph has “we don’t need an extra millisecond of speed”. I wouldn’t worry about that, if I were him, because it’s impossible — an extra millisecond of speed would go below 0.

    More seriously, as long as the exchange systems promote speed, as they do, as being faster will always be more profitable against their queue systems. One fix is to have allow for more aggregation of orders before crossing them, similar to the NASDAQ open. It is arguable whether or not HFT truly provides liquidity — one should always remember that it removes liquidity as well, and the systems are designed to *not* provide liquidity unless the signal points the other way.

  2. Algorithmic traders don’t talk about what it is they do, because anyone with sufficient technical skill can implement their strategy.

    I’ve worked for some top-level programmers who trade their own capital, and they don’t talk to anyone about what they do. Before I got involved in automated trading, I asked my future employer, who was a math prodigy as a child, why I couldn’t find any definitive information on the job description, compensation, etc, etc. He explained that automated trading is premised on having a probabilistic advantage and that that, in and of itself, is premised on others not knowing about what it is that you yourself are doing.

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