High Frequency Trading Takes a Sharp U-turn - Heading in the Right Direction

High frequency trading (HFT) was the talk of 2012, as new regulations in Europe were being discussed by policy makers for the much awaited MiFID II, high on the agenda was the subject matter of 'the future of HFT'.

The ultra fast trading approach is associated with events such as the Flash Crash Flash Crash The Flash Crash was a major stock market crash that happened on May 6, 2010 in which three major US indices crashed in the span of 36 minutes.In particular, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite fell nearly 9% before rebounding within minutes. The event differed from other crashes in that most losses were recovered.The crash was believed to be caused in part by Navinder Singh Sarao, a British financial trader. Sarao was later charged with spoofing algorithms, utilized j The Flash Crash was a major stock market crash that happened on May 6, 2010 in which three major US indices crashed in the span of 36 minutes.In particular, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite fell nearly 9% before rebounding within minutes. The event differed from other crashes in that most losses were recovered.The crash was believed to be caused in part by Navinder Singh Sarao, a British financial trader. Sarao was later charged with spoofing algorithms, utilized j Read this Term in 2010. Members of the European Parliament (MEPs) as well as certain governments and regulatory bodies have been keeping up the pressure on HFT waving their anti-HFT flag, against the nature of the trading style as well as firms that operate in this space, the most recent example having occurred just last week in Britain, where a committee made up of Members of Parliament discussed imposing a tax on HFT after last year's issuance of the Kay Review.

Sitting on the other side of the fence are not only active participants that make a living from HFT but also academics and practitioners. The trading approach has been under the academic microscope in an attempt to bring about fair and clear assessments on the exact workings of the way HFT affects the market. Notably, research sponsored by the UK government's Department for Business, Innovation and Skills (BIS) Foresight Report called; 'The Future of Computer Trading in Financial Markets – An International Perspective' was published in 2012. Results of the study showed that there are like in any system pros and cons, however there is nothing about the trading approach that is not against traditional market forces to dictate financial markets trading.

In the update we look at the harsh measures that have been taken up by Germany, one of the strong opposer's to HFT. The parliament accepted new proposals dictating how German firms in HFT ware able to trade using high frequency techniques, instant reactions to the new rulings by analysts and thinkers are that these are suicidal attempts by Frankfurt to diminish its liquid and stable financial market as participants will migrate to a better suited marketplace.

On the other hand, Australia the world's 12th largest economy's financial watchdog, the Australian Securities and Investments Commission (ASIC) carried out a study on the topic and found opposing results to the Germans, according to the research. "HFT fears are overstated”.

We also look at some of the recent changes that have been addressed by the United States in the report. In addition, the report looks at the key markets for HFT as well as the leading firms and their market share both in Europe and the USA.

HFT is a subject that will stay with us as the arms race to trade faster than the speed of light continues to prevail.

You can read the full article which is published in the recently released Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates Quarterly Report for Q2 which has full details about the recent updates in this sector.