Is High-Frequency Trading the Root of our Problems? It is the Economy, Stupid!

Posted on February 21, 2013. Filed under: Conference, Debt Ceiling, Economy, Financial Crisis, Fiscal Cliff, Flash Crash, Securities and Exchange Commission | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Edgar Perez, Author, 'The Speed Traders' and 'Knightmare in Wall Street'

Edgar Perez, Author, ‘The Speed Traders’ and ‘Knightmare in Wall Street’

Beyond the memories of the recent financial crisis and doubts about the safety and fairness of the equity markets, events such as the Flash Crash of May 2010, the hugely distressing Facebook NASDAQ initial public offering and trading malfunctions at Knight Capital and Nasdaq OMX were wrongly associated with high-frequency trading (HFT) and characterized as shocks to the psyche of average investors. The around $130 billion outflows from domestic equity mutual funds in 2012 led to Joe Saluzzi, co-head of trading at Themis Trading, to say as recently as of December 2012 that “all of those events are confidence-shattering events.”

Furthermore, U.S. congressman Ed Markey tried to persuade the SEC that high-frequency trading was driving investors off the electronic trading highway completely because it was eroding confidence in U.S. markets. Congressman Markey wrote that “sophisticated trading firms can make full use of light speed HFT algorithms, while the ordinary investor day-trading his 401k remains at more terrestrial speeds. There is a real risk that algorithmic trading is making investors hesitant to re-enter the equity markets because they fear that the entire game is rigged.” Ultimately, he proposed that HFT should be curtailed immediately.

Data from Trim Tabs Investment Research appeared to support Mr. Saluzzi and Congressman Markey’s concerns. Their data show outflows from U.S. equity mutual funds in 2008 hit a record $148 billion; in 2009, confidence appeared to be stabilizing as outflows from U.S. equity mutual funds totaled just $28 billion, only to grow again in 2010 to hit $81 billion, $132 billion in 2011 and last year totaled $130 billion. So what would they say now that the Washington-based Investment Company Institute has revealed that equity mutual funds have gathered $29.9 billion in January’s first three weeks, more than for any full month since 2006? Moreover, long-term funds, which exclude money-market vehicles, attracted $64.8 billion in the first three weeks of the month. The previous record was $52.6 billion for all of May 2009.

What was the catalyst of the change in trend? Was HFT suddenly disappearing from the equity markets? As we have suspected in the past, it was the health of the economy. The dysfunctional behavior of the leadership in Washington, leading to a crisis of significant proportions in December 2012, was holding market participants from making investment decisions; when Washington still managed to temporarily solve the fiscal cliff issue, allowing the government to remove its borrowing cap and removing the terrifying prospect of sovereign default, investors rushed into stocks (and bonds too), setting the stage for the biggest month on record for deposits into U.S. mutual funds.

We are looking at forces beyond the niche of algorithmic and high-frequency trading in action here. Signs of improvement in the U.S. economy and a rising stock market (that pushed the Dow Jones Industrial Average above 14,000 on February 1 for the first time since 2007) are now prompting Americans to step up their investments. Hiring climbed in January as well, providing further evidence that the U.S. labor market is making progress. As the economy overall makes progress, inflows will increase as more and more households and companies start to invest in the financial markets, creating a net impact in the real economy, and further reinforcing the performance of the markets. Once again, the phrase “it is the economy, stupid!” remains as valid as ever.

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高频交易是否问题的根源?

Posted on February 6, 2013. Filed under: Debt Ceiling, Economy, Financial Crisis, Fiscal Cliff, Securities, Securities and Exchange Commission | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

The Speed Traders: An Insider’s Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World

“高频交易”(High-frequency Trade),是指大型投资机构利用自己的高速计算机,在极短时间内判断出有价值的信息,从而先于市场的其他投资者进行交易,这种交易的特点是大量不停地买卖。

文/新浪财经北美特约撰稿人埃德加-佩雷兹[微博]

2010年5月的“闪电崩盘”及Facebook在骑士资本和纳斯达克的IPO交易故障等事件,都被错误地与高频交易联系到一起,被描绘为对普通投资者造成灵魂冲击。但真正原因是经济健康问题。It is the economy, stupid。这个短语仍旧有效。

除了与最近一次金融危机有关的记忆以及有关股票市场安全性和公平性的疑问以外,2010年5月份的“闪电崩盘”及Facebook在骑士资本和纳斯达克市场上令人感到非常沮丧的IPO(首次公开招股)交易故障等事件都被错误地与高频交易联系到一起,被描绘为对普通投资者造成了灵魂冲击。

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The New York Times Reports Declining U.S. High-Frequency Trading

Posted on November 12, 2012. Filed under: Conference, Exchanges, Flash Crash, Securities, Securities and Exchange Commission, Technology | Tags: , , , , , , , , , , , , , , , |

Declining U.S. High-Frequency Trading

From The New York Times, once the hottest thing to hit Wall Street in years, high-speed or high-frequency trading — known as H.F.T. — is now struggling to make gains in today’s stock market.

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The Best High Frequency Trading Book Now Available in Mandarin, Courtesy of Chinese Financial Publishing House

Posted on July 9, 2012. Filed under: Book Review, Exchanges, Flash Crash, Operations, Practitioners, Securities | Tags: , , , , , , , , , , , , , , , , , , |

The Speed Traders, An Insider’s Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World

The Speed Traders

The Speed Traders, Edgar Perez’s ground breaking work on high frequency trading, is now available in Mandarin, Courtesy of Chinese Financial Publishing House.  Unlike other works about HFT, Perez’s book provides readers with fresh, candid insight from the industry’s top HFT players.

Praise for The Speed Traders:

“Edgar’s book is fantastic . . . I recommend it highly.”
—Bart Chilton, Commissioner, United States Commodity Futures Trading Commission (CFTC)

“I have interviewed the most successful high-frequency traders in New York and Chicago, but I have learned so much more by reading Perez’s book. He covers the most relevant topics we need to know today and tomorrow.”
—Mark Abeshouse, Chairman, Augustus Capital

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