Posts Tagged ‘ high-frequency trading ’
The Alternative Imperative, Part 1
Oct 6th, 2020 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Newly Added, Alternative data, Technology, Artificial Intelligence, Alternative Investments in Context, Machine Learning, Hedge Funds, Other Topics in A.I.By Rick Roche, CAIA, Managing Director of Little Harbor Advisors, LLC Part 1 of a two-part series on Alternative Investment Data (Alt-Data) in the COVID Era. In Part 1, the author makes the case for high-frequency, short-interval Alt-Data while discussing three primary drawbacks of interpreting official economic statistics amid aRead More
Start Your Algorithms: Speed is Good Again, or is it?
Dec 30th, 2019 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Newly Added, Fintech, Alpha Strategies, Technology, Artificial Intelligence, Business News, The A.I. Industry, Hedge FundsUntil the final days of 2019, it has been a quiet year for high-frequency trading-related news. The whole concept of a trade executed in nanoseconds, and the related concept of a trading program managed with only sporadic human intervention or oversight, have all faded into background assumptions. What remains isRead More
It’s Not Cheating for Market Makers to Pay for Order Flow
Oct 24th, 2019 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Newly Added, Asset Managers, Business News, The A.I. Industry, Hedge FundsLarry 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
When Exchanges are Complements, not Competitors
Sep 26th, 2019 | Filed under: Algorithmic and high-frequency trading, Equity Hedge Funds, Newly Added, Business News, The A.I. Industry, Hedge Funds, Finance & EconomicsOne 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
Tick Size and High-Frequency Trading
Jul 15th, 2019 | Filed under: Algorithmic and high-frequency trading, Newly Added, Business News, The A.I. IndustryA 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: Algorithmic and high-frequency trading, Newly Added, Technology, Other Issues in Private Investments, Business News, The A.I. Industry, Private Investments, Risk Management & OperationsThere 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: Commodities, Algorithmic and high-frequency trading, Newly Added, Business News, The A.I. Industry, CommoditiesOn 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
Bart Chilton: A Career of Regulating Commodities, Futures and Cheetahs
May 7th, 2019 | Filed under: Commodities, Investing in Commodities, Newly Added, The A.I. Industry, CommoditiesBart Chilton, a senior adviser at DLA Piper who was from 2007 to 2014 a Commissioner of the Commodity Futures Trading Commission, passed away April 27. Chilton had a colorful reputation in the largely grey-hued world of commodities regulation. President George W. Bush appointed Chilton to the CFTC at aRead More
Ramsay on the Stay of the TFP: Reform will Proceed
Apr 9th, 2019 | Filed under: Algorithmic and high-frequency trading, Newly Added, Business News, The A.I. IndustryThe 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: Hedge Fund Industry Trends, Algorithmic and high-frequency trading, Hedge Fund Strategies, Equity Hedge Funds, Newly Added, Business News, The A.I. Industry, Hedge FundsMany 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
Transaction Fees: Market Structure Goes to Court
Feb 26th, 2019 | Filed under: Algorithmic and high-frequency trading, Newly Added, Business News, The A.I. Industry, Finance & EconomicsThe 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: CAPM / Alpha Theory, Algorithmic and high-frequency trading, Hedge Fund Strategies, Financial Economics Theory, Newly Added, Risk management, Crowdfunding, Risk Metrics and Measurement, Business News, The A.I. Industry, Risk Management Strategies & Processes, Hedge Funds, Emerging Alternative Investments, 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
High-Frequency Trading and Spoofing
Aug 31st, 2017 | Filed under: Algorithmic and high-frequency trading, Investing in Commodities, Newly Added, Business News, Commodities, Risk Management & OperationsSix 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
Weeden Suggests Half-a-Loaf for IEX
Mar 23rd, 2016 | Filed under: Industry Size & ManagersAs regular readers know, AllAboutAlpha has been following the continuing controversy over IEX, the ATS designed by Brad Katsuyama around a “speed bump.” For the uninitiated, that speed bump is a trick for saving institutional investors from the rigors of an otherwise-necessary arms race with the high-frequency traders. Of late,Read More
BATS, Spoofing, and Shifting Definitions
Sep 22nd, 2015 | Filed under: Business NewsBATS now proposes to define spoofing in an elaborate and narrow two-part manner. An investor, commenting to the SEC, accurately notes that this is a good deal different from the statutory definition, or from a definition endorsed recently in another context by BATS itself.Read More
Aleynikov Again: State Jury Conviction Set Aside
Jul 8th, 2015 | Filed under: Algorithmic and high-frequency trading, Technology, Legislation/Court rulingsThe 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, TechnologySpoofing 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
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, RegulatoryTo 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, TechnologyA 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
Explaining Why the Portfolio-Barbell Works
Jan 20th, 2015 | Filed under: Liability Driven Investing, Risk management, Emerging marketsMost efforts to introduce "entropy" into finance have seen it as a quantity to be minimized. A new paper, which begins as an effort to explain barbell portfolios, uses entropy in a different manner. Unfortunately, it doesn't really end up clarifying those barbells. Read More
ECB Beats SNB in race for the Bottom
Jan 19th, 2015 | Filed under: Commodities, Algorithmic and high-frequency trading, CurrenciesAn 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
If You’re So Smart, Why Aren’t You Rich?
Jan 14th, 2015 | Filed under: CAPM / Alpha Theory, Algorithmic and high-frequency tradingA 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
Will HFTs force a market redesign?
Nov 12th, 2014 | Filed under: Algorithmic and high-frequency trading, TechnologyOne 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
Footnote 13: Barclays Did ‘Change the Number’
Oct 7th, 2014 | Filed under: Algorithmic and high-frequency trading, Institutional Investing, RegulatoryThe 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
Metamorphosis in HFT: Update with Brad Katsuyama of IEX, Central Figure in ‘Flash Boys’
Sep 18th, 2014 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Alpha HuntersGuest columnist and intrepid reporter Doug Friedenberg talks to Brad Katsuyama about HFT, Michael Lewis and more.Read More
Responding to a Challenging Tweet about Front-Running
Aug 19th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, TechnologyWhat do I mean by "front run," asked a reader. I use the term for a range of situations in which one party trades on the basis of advance [non-public] information of another party's upcoming trade, Faille replies. Read More
SIP and the Law of Unintended Consequences
Aug 12th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, TechnologyChristopher Faille reviews the basic facts about SIP, the Securities Information Processor, and cites (with some incredulity) a new contention in some quarters that SIP isn't all that important because nobody really relies upon it. Read More
McGonagle Testifies to the Michael Lewis Hearings
May 15th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, Technology, Legislation/Court rulingsAfter some preliminaries, McGonagle got around to the central subject of his testimony, the Concept Release on Automated Trading that the CFTC had issued back in September 2013. Much of his testimony was designed to give Congress an inkling of the range of reactions the CR has since elicited. Read More
Unlocking Alpha in the New Normal
May 6th, 2013 | Filed under: Algorithmic and high-frequency tradingGuest columnist Louis Lovas looks at data management in the world of algorithmic trading.Read More
HFT-Limiting Experiment Underway in Germany
Mar 7th, 2013 | Filed under: Algorithmic and high-frequency trading, RegulatoryThe Germans seem prepared to experiment with limits on high-frequency trading, as we see in a recent Bundestag vote that leaves the particulars to BaFin. I spoke recently to David Weild, a former vice chairman of NASDAQ, about this experiment and about related issues.Read More
B of E Studies HFT: Begins and Ends with Ambivalence
Jan 6th, 2013 | Filed under: Algorithmic and high-frequency trading, Alpha StrategiesBank of England white paper on high-frequency trading yields little in the way of return.Read More
Mixed Report on HFT from Brits’ Foresight Project
Oct 31st, 2012 | Filed under: Algorithmic and high-frequency tradingThe report seeks to alleviate certain concerns about both high-frequency and algorithmic trading. In particular, "The evidence available to this Project provides no direct evidence that computer-based HFT has increased volatility in financial markets." Still, the absence of evidence is not the evidence of absence, and the Project does acknowledge prudential concerns. Read More
Hull Warns of HFT Cancellations & the Illusion of Liquidity
Oct 17th, 2012 | Filed under: Algorithmic and high-frequency tradingThe real problem behind the 2010 flash crash, Hull says, is that again as in 1987 (in a different way of course) traders were working within a market structure that allowed “the illusion of liquidity” to displace the real thing. He cites an authority, because as he says his firm, Ketchum, likes to stay close to the academic literature.Read More
People as Market Makers Were Never Crash Insurance Either
Aug 30th, 2012 | Filed under: Algorithmic and high-frequency trading, Alpha StrategiesThe new technologies make less difference than some might think. "Even back in the days of physical market makers, when things went bad, as for example in the crash of '87, the market makers would head for the hills," said James Angel. Nowadays the computers go dark. Or (worse) they don't.Read More
Dear SEC: Comments on the JOBS Act
Jul 19th, 2012 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Real Estate, Private Equity, RegulatoryA veteran of hedge funds and private equity, Jeff Joseph offers some comments to the U.S. Securities and Exchange Commission on the JOBS Act and what this legislation has the potential to mean to the global alternative investment community.Read More
CFTC Working Group Tries to Define High Frequency Trading
Jul 5th, 2012 | Filed under: Commodities, Algorithmic and high-frequency tradingHere is a draft definition of high frequency trading presented to the CFTC on June 20. HFT is a form of automated trading that employs: (a) algorithms for decision making, order initiation, generation, routing, or execution, for each individual transaction without human direction; (b) low-latency technology that is designed to minimize response times, including proximity and co-location services; (c) high-speed connections to markets for order entry; and (d) high message rates (orders, quotes, or cancellations).Read More
The Ultimate in High-Frequency Trading
May 9th, 2012 | Filed under: Algorithmic and high-frequency trading, Alpha StrategiesQuite aside from the neat through-the-planet short-cuts they might allow: how fast is a neutrino? This turns out to be a very controversial matter. Last year, scientists working at CERN set off weeks of feverish speculation with reports indicating that neutrinos travel faster than light. If I understand this at all, it would mean if true that a New York or London trader could in theory accept a Tokyo trader’s offer before the offer had actually been made. Now that would be the ultimate in HFT: negative latency. Read More
Axioma to Quants: Beware of Cherry Picking by Optimizers
Mar 15th, 2012 | Filed under: Algorithmic and high-frequency tradingReliance on optimization tools that in turn rely on standard “user risk factors” will make factor alignment worse, caution three executives of Axioma. An optimizer will cherry pick “the aspects of the model of expected returns that it deems desirable when gauged on the yardstick of marginal contribution to systemic risk.” This amounts to making, and betting on, the erroneous assumption that a lack of correlation with the used risk factors is a lack of systemic risk altogether.Read More
Algo Trading: Life in the Cross-Hairs
Mar 8th, 2012 | Filed under: Hedge Fund Regulation, Algorithmic and high-frequency tradingThree lawyers with Covington & Burlington write about the new intensified scrutiny to which regulators are subjecting algorihtmic and high frequency trading. They place it in the context of an old dispute over what constitutes market manipulation. According to the broadest view, if a trader's 'sole intent' in making even a quite ordinary buy or sell order is to move the price, then the resulting trade is market manipulation.Read More
Aleynikov Released: Second Circuit Doesn’t Love a Wall
Feb 27th, 2012 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Alpha StrategiesSome managers of HFT or algorithmic funds must have felt some relief upon the arrest of Sergey Aleynikov in July 2009, his conviction in December 2010, or his imprisonment the following March. Programmers in the financial world were put on notice that criminal prosecution was among the possible consequences were they to treat their knowledge of their employer's edge as a marketable commodity. Thus, the news on Friday [February 17, 2012] that Aleynikov is now a free man came as something of a jolt. Read More