Tag Archives: High Frequency Trading

High Frequency Traders (HFT) exit the scene….

While more of a nuisance than a show stopper for us, we noticed High Frequency Traders (HFT’) have been less prevalent recently than in the past. Yesterday at a lunch meeting with fellow professionals this topic was bantered a bit. Right on time a nice supporting view from traders magazine today.HFT

HFT and the Flash Crash?

While we do not attribute all of the flash crash to HFT trading, there is a high likelihood that at least partial blame goes to these folks who all at once stepped aside allowing the markets to plunge several percentage points only to rise again. The good news from this experience are new circuit breakers have been installed to prevent this occurrence again, so possibly a good result.

HFT Profits Vanish

According to this Traders Magazine Article, Rosenblatt securities estimates

“…profits have dropped from $0.001 to 0.0015 a share to $0.0005 to $0.00075….”

“The largest electronic market maker, GETCO, saw its net income drop 82 percent in the first nine months of 2012, compared to 2011, to $24.6 million.”

Such a dramatic drop in margins will certainly chase current players away and thwart new entrants.

Where does this leave us? No more HFT? Doubtful

In domestic and overseas equity markets, low volatility, mostly positive movement has stymied much fo the HFT trading in our opinion. Should volatility come back we would expect an increase in HFT activity, however, our bet, they are on to greener pastures…..Commodities or currencies anyone (both highly leveraged)

Again as a non day trading firm HFT were not our enemy, although there were times when we had to pull in our reins to keep from donating an extra few cents to their cause. We will keep our eyes peeled as true capitalists, it is highly likely they will show up in another area of the capital markets in the future.

Have a Great Day!

JK

214-706-4300
www.jkfinancialinc.com
8222 Douglas Ave # 590
Dallas, TX 75225

A sure thing, not so sure anymore…HFT (High Frequency Trading) slows….JK’s Travel Schedule Reminder

We along with many others have commented somewhat neutrally to the uprising of the machines… AKA High Frequency Trading (HFT) it appears their dominance may already be waning.

On May 6, 2010 HFT was thrust into the headlines as a sudden and sharp drop in capital market indexes was blamed on a collective HFT shut off by several firms, leading to thin and low trading volumes on many stocks and allowing for sporadic pricing when large orders came to the market.

Fast forward to today and as a recent New York Times Article pointed out, HFT trading dominance may be on the way out.  It appears that HFT was not as profitable as once thought, and participants once rushing for the gold pan, are now leaving the equity market. We have noticed less HFT distractions during trading as well. It is nice how markets adjust to weed out unnecessary participants.

It is worth keeping an eye out for other playgrounds as some may take their tools to another stage i.e. futures, commodities etc…. time will tell.

As a reminder, I will be traveling on Thursday and Friday (18-19) of this week, but will be tethered electronically to the office.

Have a Great Day!

JK

214-706-4300
http://www.jkfinanacialinc.com
8222 Douglas Ave # 590
Dallas, TX 75225

High Frequency Reporters…..Read Carefully

Much has been said of HFT (High Frequency Trading) the new generation of computer trading and its involvement and sway in the capital markets. In an interesting parallel, our sir named HFR (High Frequency Reporters) or computer generated stories from raw data, according to this AFP/Yahoo article are making their way into main stream media in a more prominent manner.

As you may know from our mentions of the possibly overly dramatic headlines, and while we have a huge appetite for vast amounts of data, stories, and headlines (occupational hazard), we remind you (and our selves) to carefully scrutinize the stories often as they may not always read true to the facts.

Much to our surprise/ignorance the prior mentioned AFP article, “Call him Al for algorithm” of computer generated articles, using fast paced computer algorithms (fancy word for if then analysis) opened our eyes to the artificial intelligence being uses for literature these days.

Here is out quick take on this in bullet point fashion:

  • Speed is good, but can be dangerous
  • Computers can never replace human reason 100% of the time
  • There will be errors, some may be very costly if not monitored
  • Pressure will be on real reporters to be even more dynamic
  • Checking the facts is more important than ever
  • The pendulum always swings too far and will eventually settle where it should be, somewhere in the middle

In the vein of progress, we appreciate the accelerated speed at which information travels, however the double-edged sword it also carries is worth remembering, as we feel there will be a occurence eventually where a computer algorithm generates a story that causes an issue, but hey, we humans make mistakes too!

Have a Great Day!

JK

PS As a reminder, I will be out of the office later in the week.

214-706-4300 www.jkfinancialinc.com