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.

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 ...