Browsing: Algorithmic and high-frequency trading

Algorithmic and high-frequency trading

Machine Learning: Beyond the Fear of Unknown Unknowns

Nov 17th, 2019 | Filed under: Newly Added, Technology, Artificial Intelligence, Algorithmic and high-frequency trading, The A.I. Industry, Equity Hedge Funds, Alpha Strategies, Hedge Funds, Event-Driven Hedge Funds, Business News, Macro and Managed Futures Funds, Other Topics in A.I.

Machine learning as a way of managing a portfolio is a “wave of the future” with a lot of sea to cover before it breaks on the shore. Meson Capital Partners has sent its investors an update and summary for 2019 Q3 regarding its managed market neutral fund, and thisRead More


It’s Not Cheating for Market Makers to Pay for Order Flow

Oct 24th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, Hedge Fund Strategies, The A.I. Industry, Asset Managers, Hedge Funds, Business News

Larry Tabb, in a piece in the Financial Times, has defended the controversial practice of payment for order flow (PFOF). Let’s start with PFOF and why it’s controversial. The UK’s Financial Conduct Authority defined PFOF in a recent white paper as the practice in which an investment firm, typically aRead More


Past performance guarantees no future results

Oct 17th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Financial Economics Theory, Risk management, Business News, Risk Management Strategies & Processes, Finance & Economics

Since, as everyone says, “past performance is no guarantee of future results,” a history of close correlation between two assets, or between a single asset and a benchmark, is no guarantee of future correlation. The threat that a correlation upon which a particular investor has relied will cease to applyRead More


When Exchanges are Complements, not Competitors

Sep 26th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Equity Hedge Funds, Hedge Funds, Business News, Finance & Economics

One regular theme of coverage and analysis that involves the listed equities, including analysis of the pursuit of alpha, is that many of the users of these markets claim, often quite obstreperously, that the exchanges charge more than makes sense and some restructuring of the industry is in order. TheRead More


QUANT STRATEGIES: THEORY VS. REALITY

Aug 11th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, Hedge Fund Strategies, The A.I. Industry, Equity Hedge Funds, Liquid Alternative Investiments, Hedge Funds, Smart Beta, Other Topics in A.I.

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION When pitching an investment product with a backtested history the frequent response from potential investors is that they have never seen a bad backtest. Naturally this is true as there is no point in marketing a strategy with a poor backtest as investorsRead More


Tick Size and High-Frequency Trading

Jul 15th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Business News

A lot of hopes have been placed on changes in market tick sizes. In the 1990s there was a big push to reduce the tick sizes of securities, allowing them to get down to one cent or fractions thereof. In the new millennium came a sense of regret. Observers suspectedRead More


Quantum Computing Will Mess Up all Expectations

Jul 11th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Technology, Other Issues in Private Investments, Business News, Private Investments, Risk Management & Operations

There are reports that Google is preparing an announcement of “quantum supremacy” for later this year. If true, this is the biggest tech story since the transistor replaced vacuum tubes. It could be a disruptive development for just about every business with an IT department. Among much else, quantum supremacyRead More


ICE Futures Gets Its Speed Bump

Jun 4th, 2019 | Filed under: Newly Added, Commodities, Algorithmic and high-frequency trading, The A.I. Industry, Commodities, Business News

On Feb. 1, ICE Futures US Inc., informed the Commodity Futures Trading Commission that it was instituting a new “speed bump,” formally called the Passive Order Protection (or POP) Functionality for its gold daily and silver daily futures markets. The idea of POP is to limit the advantage that canRead More


Interest Rate Derivatives, Announcements and HFT: It’s All About Timing

May 23rd, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Credit Derivatives, Structured Credit Products, Structured Products

Three scholars associated with the University of Wollogong, Australia, recently published a paper on the contribution of high-frequency traders to the absorption of new information by the markets, especially in relation to the prices of interest rate derivatives. The study is the work of Alex Frino, Michael Garcia, and IvyRead More


Ramsay on the Stay of the TFP: Reform will Proceed

Apr 9th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Business News

The Securities and Exchange Commission recently imposed a stay on part of its transaction fee pilot (TFP). There is understandably a good deal of debate about the significance of this stay. The TFP, initiated in December 2018 with the expectation that it would run for at least one year, andRead More


High-Frequency-Trading Firms: Fast, Faster, Fastest

Apr 2nd, 2019 | Filed under: Newly Added, Hedge Fund Industry Trends, Algorithmic and high-frequency trading, Hedge Fund Strategies, The A.I. Industry, Equity Hedge Funds, Hedge Funds, Business News

Many high-frequency trading (HFT) firms have disappeared into larger firms as merger activity has increased recently. Those acquired include Chopper, Infinium, Teza, RGM Advisors, and Sun Trading. It also includes Getco, the Chicago-based firm founded in 1999 by two former floor traders that almost defined the field for some time.Read More


Bayesian Probability Theory and a Hierarchical Learning Portfolio

Mar 19th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Financial Economics Theory, The Global Economy & Currencies, Business News, Finance & Economics

Two scholars working with Bayesian probability theory recently published a fascinating discussion of market timing and portfolio efficiency. They have proposed what they call a “hierarchical ensemble learning portfolio.” Yes, that sounds rather heavy on the jargon. We’ll break it down a bit in what follows. The authors of theRead More


Algorithms Moving into the Bond Markets

Mar 17th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Risk management, Risk Metrics and Measurement, Risk Management Strategies & Processes

Algorithmic trading may fairly be said to have conquered the public equities world, although there are still pockets of resistance and related controversies. The robots have now turned their attention to the bond markets. Bond markets are different from stock markets in a lot of ways, and many of theseRead More


Transaction Fees: Market Structure Goes to Court

Feb 26th, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Business News, Finance & Economics

The NYSE, on Thursday, Feb. 14, Nasdaq, and Cboe Global Markets (the following day) have united to bring lawsuits against the Securities and Exchange Commission to stop its transaction fee pilot. These are the three largest US equity exchanges and their attitude toward their regulator is usually one of cooperation.Read More


A Brief History of Asset Allocation

Oct 16th, 2018 | Filed under: Newly Added, CAPM / Alpha Theory, Algorithmic and high-frequency trading, Hedge Fund Strategies, The A.I. Industry, Financial Economics Theory, Risk management, Crowdfunding, Hedge Funds, Emerging Alternative Investments, Risk Metrics and Measurement, Business News, Risk Management Strategies & Processes, Finance & Economics, Other Topics in A.I.

Glassbridge has put out an ambitious white paper about the “evolution of asset allocation across the investment management industry,” one that begins with the basics of the Capital Asset Pricing Model and ends with quantitative analysis and crowdsourcing. The premise is that new strategies, and new ranges of data, areRead More


National Market System: What to End; What to Mend

Oct 14th, 2018 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Regulatory, Regulatory Environment, Commodities, Business News

The Principal Traders Group of the Futures Industry Association (FIA PTG) recently offered its thoughts on market structure, outlining one direction of reform for the Securities and Exchange Commission’s Reg NMS. Reg NMS (National Market System) was promulgated in 2005, in order to ensure competition among markets, and in theRead More


Inaccurate News Analytics: When Robots Get Things Wrong

Aug 28th, 2018 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Equity Hedge Funds, Hedge Funds, Event-Driven Hedge Funds, Business News

A new study prepared for the Federal Reserve Board looks at the use of algorithms to read and interpret financial news. While there have been a lot of studies that have looked at this topic, one unique feature of this new paper, “First to ‘Read’ the News,” is that itRead More


Quants and Fundamentalists Unite!

May 31st, 2018 | Filed under: Newly Added, Hedge Fund Industry Trends, Algorithmic and high-frequency trading, The A.I. Industry, Hedge Funds, Fees, Structure of the Hedge Funds Industry

By standard definition, a “quantitative” investing strategy is one that selects securities using customized models, often algorithm-driven and thus on the operational level independent of human judgment. Again working from standard definitions, a “fundamental” investing strategy involves an examination of whether the entity issuing a security (corporation, sovereign, or other)Read More


What Makes Big Data So … Big?

Mar 22nd, 2018 | Filed under: Newly Added, Algorithmic and high-frequency trading, Business News, Finance & Economics

The term “big data” has become a cliché. One has to remind one’s self that it is a somewhat ill-fitting label. What is new about the world of data isn’t that there is a lot of it; nor that on the software end the processing of data becomes easier overRead More


Algorithmic Traders: Proprietary, Agency, Liquidity

Nov 9th, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Business News, Finance & Economics

Two scholars affiliated with the Indian Institute of Management, in Calcutta, have posted a paper about the effects of algorithmic trading on liquidity. This paper, by Samarpan Nawn and Ashok Banerjee, based on the first chapter of Nawn’s Ph.D. dissertation, distinguishes sharply between proprietary algorithmic traders and agency algorithmic traders,Read More


AIMA and SGPS on Managed Futures and CTAs

Sep 28th, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, CTA, The A.I. Industry, Investing in Commodities, Commodities, Business News, Institutional Asset Management, Macro and Managed Futures Funds, Allocating to A.I.

The Alternative Investment Management Association and Societe Generale Prime Services have together put out a white paper about managed futures funds and the commodity trading advisers who manage them. A key themes of the paper is that managed futures strategies aren’t as risky as are typical investments in equity markets.Read More


High-Frequency Trading and Spoofing   

Aug 31st, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Investing in Commodities, Commodities, Business News, Risk Management & Operations

Six years ago Michael Coscia placed orders through the CME Group’s Globex platform via a trading algorithm that amounted to “spoofing.” He placed both large and small orders in the copper market, for example, with the large orders (cancelled within milliseconds) designed to create the illusion of market movement inRead More


BIS Numbers and the Market for Forex NDFs

Jun 1st, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Forex, The Global Economy & Currencies, Business News, Finance & Economics

A little over a year ago, the Bank for International Settlements announced its 11th Triennial Central Bank Survey of Foreign Exchange and Over the Counter Derivatives Market Activity. In recent days, Pragma Securities has referenced those BIS numbers in explaining the market for its latest service, an expansion of PragmaRead More


Big Data is Old Hat: Machine Learning is Hot

Jan 26th, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Benchmarking & Performance Attribution, Business News, Allocating to A.I., Finance & Economics

A year ago, in a report on Big Data and investment management, Citi Business Advisory Services predicted that “with the improved volume, velocity and variety of data inherent in the big data approach, the innovation seen in systematic trading models over the past decade could accelerate.” One of the platformsRead More


On the Bitcoin Blockchain: Looking Under the Hood

Jan 19th, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Currencies, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Business News, Finance & Economics

More than a year ago, the Capco Institute Journal of Financial Transformation (Journal) ran a “critical assessment,” by Robert Sams, of bitcoin blockchains as a means of distributed clearing. With both bitcoins and blockchains newly in the news, Sams’ informed assessment is worth another look. Two years ago, Nasdaq announcedRead More


Academics:  No, Navinder Sarao Did Not Cause the Flash Crash 

Oct 25th, 2016 | Filed under: Newly Added, Hedge Fund Operations and Risk Management, Algorithmic and high-frequency trading, Risk management, Technology, Operations, Personalities in AI, Business News, Risk Management & Operations, Finance & Economics

Mid-October news reports tell us that Navinder Sarao has lost his effort to avoid extradition from Britain to the United States. So he will face charges in the U.S. in connection with the “flash crash” of May 2010, the incident in which the DJIA fell 998.5 points in less thanRead More


Tick Pilot Program: A Progress Report

Oct 4th, 2016 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Regulatory Environment, Business News, Finance & Economics

The long-awaited nickel-tick pilot program, an effort to test an alternative to the penny-or-less tick sizes that now prevail, , officially gets underway on October 3, and is scheduled to continue for two years. Securities have been selected and the phase-in schedule is set. The pilot is of significance, becauseRead More


ESMA’s Greybeards Ponder Blockchains

Sep 11th, 2016 | Filed under: Newly Added, Algorithmic and high-frequency trading, Currencies, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Business News, Finance & Economics, Other Topics in A.I.

There has been a flurry in recent days of activity about blockchains among the graybeards of the financial world, those who ponder the Really Big Picture and who have the ear of important regulators. Let us start from the beginning. What is a blockchain? It is a chronological, virtual, andRead More


UC Berkeley: Stale Prices Not a Threat to Liquidity Takers

Sep 7th, 2016 | Filed under: Newly Added, Algorithmic and high-frequency trading, Equity Hedge Funds, Alpha Strategies, Hedge Funds, Business News, Finance & Economics

Two scholars associated with the University of California, Berkeley, have argued in a recent paper that there is less to latency arbitrage, or at least to a certain paradigmatic sort of latency arb, than meets the eye. Robert P. Bartlett III and Justin McCrary used data from the Securities InformationRead More


Lewis’ Heroes Get an Exchange for Their Speed Bump

Jun 26th, 2016 | Filed under: Newly Added, Algorithmic and high-frequency trading, Hedge Fund Strategies, Equity Hedge Funds, Hedge Funds, Business News

On Friday, June 17, the Securities and Exchange Commission approved the promotion of IEX from an ATS to a proper exchange. Thereby it gave a new ending of sorts to Michael Lewis’ book, Flash Boys. One of the big issues for both proponents and opponents of IEX’ application to becomeRead More


Bollerman Addresses IEX’s Critics

Feb 9th, 2016 | Filed under: Newly Added, Algorithmic and high-frequency trading, Business News

IEX, the institution created by Michael Lewis’ “flash boys,” began life as an ATS. But as its name, a shortening of “Investors’ Exchange,” suggests, it has always aspired to be an exchange. One of its core principles is its “speed bump,” a system of delaying the availability of market pricingRead More


Overtrading and the Danger of Pro Rata

Jul 30th, 2015 | Filed under: Commodities, Algorithmic and high-frequency trading, Currencies, Derivatives, Forex

Guest columnist Ginger Szala looks at pro rata and what happens if...Read More


Aleynikov Again: State Jury Conviction Set Aside

Jul 8th, 2015 | Filed under: Algorithmic and high-frequency trading, Technology, Legislation/Court rulings

The judge's ruling setting aside the jury's guilty verdict is, of course, grand news for Aleynikov. It is also the curtain on a sometimes farcical spectacle. But let us not forget that there are issues of principle involved. Read More


Spoofing: The ‘It’ Enforcement Action

Jun 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Derivatives, Regulatory, Technology

Spoofing is probably about as ubiquitous as texting-while-driving. And it is possible to make an example of a spoofer caught red-handed. But it isn't clear what purpose that will serve. The real problem is that a broken market contains a broken set of incentives. Read More


The Forrest or the HFTrees? ‘Preferred Data Customers’

May 7th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Legislation/Court rulings

It is of course possible to “question the wisdom of the SEC’s stance on this issue and its fairness to ordinary investors,” said the Judge in the Lanier/HFT decision. But the court isn’t in the business of second guessing the wisdom of regulation. Lanier's claims are dismissed. Read More


Authorities Offer Revisionism About Flash Crash

Apr 22nd, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Indexes

Authorities now claim that the shenanigans that set off the flash crash of May 2010 were the work of Navinder Singh Sarao. Does this mean Waddell & Reed were unjustly maligned? Almost certainly. Read More


Aleynikov’s Trial and My Cousin Vinnie

Apr 21st, 2015 | Filed under: Algorithmic and high-frequency trading, Intellectual Property, Legislation/Court rulings

A party seeking to employ an expert witness is supposed to let the other side know who the expert is in advance of trial. Fans of a classic Joe Pesci movie will remember that it isn't necessary to join the prosecutor in a hunting lodge. Read More


Reflections on the MS Internet Explorer, R.I.P.

Apr 5th, 2015 | Filed under: Algorithmic and high-frequency trading, Technology, Legislation/Court rulings

The U.S. Department of Justice typically brings high-profile antitrust actions against 'monopolists' by piling its legal theories on top of dubious micro-economics. A recent announcement by Microsoft sends Faille down memory lane, to two 1990s era actions by the D of J against MS in the days when Bill Gates was still a great media ogre. Read More


A Taylor-Swift Lawsuit: ‘I’ve Got a Blank Space Baby.’

Mar 26th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Derivatives, Technology

This is the story of one high-frequency trading firm suing one or more others and giving detailed credence to everything that has been said over the last year or so by those who bemoan the rise of HFT firms. Read More


A Basis for Pursuing the Pursuers? Sonar-based Whale Hunts

Feb 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Institutional Investing, Alpha Hunters, Regulatory

To the extent that high-frequency trading is analogized to 'insider trading,' it may be in trouble with securities regulators but still in the clear with commodities regulators. After all, the latter do allow hedgers to use non-public material information to protect themselves. But Gregory Scopino doesn't believe pinging and related HFT practices should be in the clear with the CFTC at all. Read More


Should Governments Slow Trading Down by Taxing It?

Feb 5th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Regulatory, Technology

A physicist recently suggested that exchanges might do well to change the nature of the trading they host, holding batch auctions every one-hundredth of a second to better serve their real economic functions. Then a commenter proposed that taxation could achieve the same effect. Our physicist went back to the drawing board to consider this. Read More


ECB Beats SNB in race for the Bottom

Jan 19th, 2015 | Filed under: Commodities, Algorithmic and high-frequency trading, Currencies

An SNB announcement caused wild market moves Jan. 15th, not only in Forex but in commodity and equity prices as well. In the wake of the commotion, one key question has to be: why the announcement? Why this sudden change in the policy of Switzerland's central bankers? Read More


The Quant Conundrum: Perfectly Repeatable or Repeatedly Imperfect?

Jan 15th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Risk management, Alpha Seekers

Guest columnist Diane Harrison looks at both sides of the quantitative investment debate.Read More


If You’re So Smart, Why Aren’t You Rich?

Jan 14th, 2015 | Filed under: CAPM / Alpha Theory, Algorithmic and high-frequency trading

A new paper by a senior market economist at BNP Paribas celebrates the invention of Learning Vector Quantization (LVQ), a machine-learning algorithm that could enable some smart economists to get very rich indeed. Read More


Let’s Hope Nothing Comes of Sprecher’s Grand Bargain

Jan 13th, 2015 | Filed under: Algorithmic and high-frequency trading, Regulatory, Technology

Sprecher proposes that the exchanges and the investment banks enter into a deal, and that regulators confirm it by various tweaks in the NMS. The whole dynamic that the "grand bargain" represents is a disturing one, old-fashioned smoke-filled-room cronyism. Read More


Thoughts on Futurology and its Perils

Jan 6th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Technology

The Permal Group takes a refreshingly modest view of the eventual impact of Big Data on the business model of hedge fund managers. The better the data about a corporation, the more accurate the stress testing. Yes, that seems reasonable. Read More


Plans for a Nickel-Tick Pilot: Trouble in the Details

Dec 15th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, Technology

Observers of the slow slog toward an empirical test of larger tick sizes have raised concerns about the details of the three-track plan under consideration. In particular, there's an order-protection feature for one of the three "tracks" that has raised the hackles of Larry Tabb and the STARead More


Will HFTs force a market redesign?

Nov 12th, 2014 | Filed under: Algorithmic and high-frequency trading, Technology

One of the unintended consequences of high-frequency trading may be that it forces a market re-design. Guest columnist Ginger Szala looks at the issues.Read More


Untangling the web of HFT

Oct 13th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, Technology

What is the real issue behind intermarket sweep orders, and the recent dust-up over an NYSE rules change? Faille answers: Privilege. Read More


Footnote 13: Barclays Did ‘Change the Number’

Oct 7th, 2014 | Filed under: Algorithmic and high-frequency trading, Institutional Investing, Regulatory

The most intriguing revelation in the exchange of briefs between the State of New York and Barclays appears in a humble footnote, where Barclays seems to concede that an employee was pressured to change an internalization number. But it was just the once.... Read More