Jeffrey Wecker, president and CEO of Lime Brokerage, recently vigorously defended the performance of high frequency traders on May 6th, the day of the flash crash, against critics who blame the fast traders for pulling back on liquidity.
“We saw hundreds of millions of shares traded by our HFT clients Thursday with no issue,” commented Wecker, who spoke at Accelerating Wall Street, an event hosted by Wall Street & Technology on May 11th, only five days after the market’s 20-minute rollercoaster ride.
In his keynote speech, Wecker, whose firm provides a low latency trading infrastructure to high frequency traders, said: “Though we did see fast moving markets, we also saw people backing off the bids and offers and also plowing back in and trying to trade. This is a prime example to us of HFT continuing to bring efficiency to the markets,” said Wecker.
As for his firm’s trading infrastructure, “Comprehensive pre-order controls were put in before any single order or trade,” said Wecker, who later on predicted that these controls would become a regulatory requirement.
Despite media reports that some high frequency trading firms shut off their strategies and withdrew their bids and offers so there were no bids no counter the selling pressure of algorithmic trades hitting the electronic venues, Wecker defended the HFT community. “I believe that HFT is being inappropriately blamed as a part of a witch hunt. It’s amazing to see this form of argument equating ‘fat finger’ trading with high frequency trading,” said Wecker.
Fact From Fiction “There is so much noise in the market that it’s challenging to separate fact from fiction,” he continued. “I believe the events of the last week serve to heighten the awareness and importance of HFT in today’s markets but at the same time, it created a whole new host of commentators on the form of trading.”
To correct some of the misinformation in the market, Wecker went on to define HFT, illustrating the gamut of strategies operating under the HFT category. “We think about it as electronic liquidity provision, firms that are simultaneously on the bid and offer on as many securities as they can, except when they have a signal. In some cases, they are engaged in rebate arbitrage or capitalizing on exchanges fees of market centers,” explained Wecker. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio