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Greg MacSweeney
Greg MacSweeney
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HFT Players Struggle to Survive

High-frequency trading shops are having a difficult time in the current marketplace, as trading volumes remain extremely low. This week, Eladian closed its doors due to the weak market. Who will be next?




1. Not As Easy As It Looks

There was this mythology that you could get 90 computers, some Harvard Ph.D.'s and you would turn on your machines and make money. It's just not the case.

-- Douglas Cifu, president of HFT player Virtu Financial

Source: New York Times: High Speed Trading No Longer Hurtling Forward




2. Vanishing Profits

Rosenblatt Securities estimated that HFT firms would earn no more than $1.25 billion in profits this year, down 35 percent from last year and 64 percent beneath a peak of about $4.9 billion in 2009.

-- AdvancedTrading.com

Source: Eladian Closure an Ominous Sign for High-Frequency Trading




3. HFT Tax

Transaction taxes could very quickly put a brake on numerous undesirable activities: high frequency trading, the explosion in derivatives and overuse of repo financing. You might collectively think of these things as "junk liquidity" or "junk trading."

-- Nakedcapitalism.com

Source: It's Time for a Tax to Kill High Frequency Trading


4. Downward Pressure

Eladian's failure demonstrates how difficult it is for market-making firms to prosper in current market conditions.

-- Douglas Cifu, president of HFT player Virtu Financial

Source: NY Times Dealbook: High Speed Trading Executives Shut Firm


5. Reality Check

Now that they have to play by the rules, many strategies just aren't profitable.

-- Tweeted Eric Scott Hunsader, founder of Nanex LLC

Source: @nanexllc


6. An Apple A Day...

#HFT out-of-control overloading $AAPL #Options with bogus quotes. "Because we can, and SEC has no way to know"

-- Tweeted Eric Scott Hunsader, founder of Nanex LLC

Source: @nanexllc


7. Just Google It

algos took out 1.5 months of price move in 7 minutes...now that's providing liquidity right? $goog

-- Tweeted Eric Scott Hunsader, founder of Nanex LLC

Source: @nanexllc

 

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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