May 11, 2011

The new gold rush is taking place in the Far East. Plagued with depressed trading volumes, brutal competition and stunted growth, high-frequency trading firms are setting their sights on the Asia-Pacific region as the U.S. and European markets stagnate.

According to a Financial News report, a number of U.S. firms - including Citadel, Getco, Jane Street Capital and Optiver - are among the firms that have tired of the technology arms race in the U.S. and Europe and are setting up shop in Asia.

From Financial News:

Tokyo is currently the leading hub for high-frequency trading firms in Asia-Pacific, where the trading practice now accounts for about 45% of trading volumes, according to Credit Suisse.

In a bid to bolster liquidity and increase high-frequency trading volumes, the Tokyo Stock Exchange launched its Arrowhead trading platform in January last year. The Tokyo Stock Exchange is under increasing competition from Chi-X Japan, the Tokyo-based alternative trading facility, which has created arbitrage opportunities for high-frequency trading firms.

Hiroshi Matsubara, a director at Fidessa in Japan, a trading technology firm, says further structural changes are afoot. A suggested tie-up between the Tokyo Stock Exchange and Osaka Securities Exchange would "create quite good microsecond arbitrage opportunities" as high-frequency trading firms would obtain access to multi-asset class trading opportunities on a single platform.

Singapore currently stands behind Japan as a leading high-frequency trading hub in the region. Getco has set up operations in the country and makes markets on the exchange, which is migrating to a new platform provided by Nasdaq OMX. The upgrade will make Singapore one of the fastest markets in the world.

ABOUT THE AUTHOR
As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced ...