Wednesday, July 29, 2009

High Frequency Trading

I am sitting in my hotel lobby in Santiago de Compostelo, Spain, and trying to put in a half hour of laptop time while my wife and daughter are still sleeping. I am reading all of the hub-bub surrounding HFT and algo trading, all brought on by the arrest of the Goldman Sachs employee. This morning, Paul Wilmott has an editorial in the New York Times.

What is going through my mind right now is the fact that, if HFT was regulated or banned, it would cost the jobs of a good number of very smart people in the Capital Markets industry. It would cause irreparable harm to some of the companies that support low-latency infrastructure. And, it would transform the Capital Markets industry in ways that I could not even imagine.

More thoughts on this later.


©2009 Marc Adler - All Rights Reserved.
All opinions here are personal, and have no relation to my employer.

2 comments:

Louis Lovas said...

Completely agree with your sentiment. A Fed ban on HFT would be disastrous for a wide range of businesses well beyond traders. I made a point of this 'food chain' in my last blog about the arms race of HFT.

However, recent news about 'Flash Trading' http://tinyurl.com/no4gph does make one think about the current level of fairness in the HFT game. Goldman revealed a bit more than they wanted to prosecute the theft of it's secrets. An act that caused to Feds to say 'Hmmm, so this is how they play the game, rather sneaky'.

Oh well, looks like the thief may in fact cause the whole HFT game to be a bit more transparent. http://tinyurl.com/marl7m

marc said...

Louie,

I am sure that GS regrets letting the cat out of the bag. And, it had a waterfall effect in turning the common man's attention to thinks like Flash Orders. And, then people like Chuck Schumer gets very visibly involved ... you can expect people like Andrew Cuomo and Blumenthal to start getting involved.

Imagine going back to the old buy-and-hold days?!