High-Speed Data and OTC Markets (No matter how much markets and rulebooks across the globe are changing the need for speed is not going away; it is as persistent as it ever has been. Just in the past week, German and other EU regulators voted to implement a series of curbs to address concerns about high-frequency trading. (See Rebecca Healey’s “European Parliament: Slamming the door on HFT” on TabbFORUM for more.) You can expect other jurisdictions – namely in the US - to augment the debate (see Larry Tabb testifying before the Senate Banking committee on HFT and Equity Market Structure on TabbFORUM as well), for the drumbeat of rhetoric to become louder and louder, and for additional measures to be brought to the front lines. In a period of deleveraging and the resource constraints it inherently fosters, you can bet that there will be lots of bogeymen to chase – real and imagined.
Yet, none of this changes the need for speed. Speed has always been a part of the story, always will be. (BTW, if anything, highly automated trading programs have done little more than replace the hundreds of floor traders that formerly captured “lubrication profits” in a prior era, but that is an entirely different commentary.) In fact, solutions for speed will continue to march forward in spite of the regulatory and economic headwinds that have seemingly put an end to what will eventually become known as the “Golden Age of HFT”. These solutions will continue to become smarter, cheaper, and, in some cases, faster – as they inch, microsecond by microsecond, closer to the barriers of the speed of light at lower costs.
Comments | Post a Comment
5 Comments to "The Role of Speed":
csparrow
28 September 2012
Speed is only important because we have created a market structure that rewards speed. It doesn't have to be this way. We could instead provide a market structure that is geared toward capital allocation and long term investment. We "simply" need to move away from a continuous trading model.
Because of the focus on latency and the emphasis on taking advantage of participants who haven't adopted the latest technology, we find ourselves in an arms race that has massively increased systemic risk. These are externalities that could be structured away.
Instead of providing an environment to showcase technology, we could provide an environment that allows investors to trade with confidence.
Maybe the focus should switch from speed to functionality: what is it we want from our capital markets? faster networking switches that use quantum effects to eke out attosecond improvements in latency or a way for companies to raise capital and create secondary markets where investors can trade with confidence?
Comments (37)
prowady
01 October 2012
csparrow: respectfully, I view speed (or automation) and functionality as mutually exclusive. they have always coexisted. I do agree, however, that market structure is overly complex, is tilted towards speedier players (under the guise of minimizing costs to everyday investors), and seems to have de-prioritized capital formation. Lastly, on the topic of investor confidence, you might consider that massive and unprecedented central bank intervention is playing a role in changing market demographics, impacting automated trading programs of all kinds (which plays a role in today's glitchfest), and generally spooking investors to the sidelines.
EP
Comments (83)
Anonymous
01 October 2012
Maybe this ridiculousness will end when the "need for speed" reaches the speed of light.
Anonymous
07 October 2012
There IS no market liquidity about HFT, since, as it is well known for some time now, 90% of HFT orders are actually canceled.
crammond1964
10 October 2012
These solutions will continue to become smarter, cheaper, and, in some cases, faster – as they inch, microsecond by microsecond, closer to the barriers of the speed of light at lower costs. !!!!!!!!!!!!!!
sorry but as yet none of these have actually happened ... remember jimmy saville said once "speed kills ! " and currently they are .
Comments (252)