Tag: HFT

Some HFT strategies to be banned in EU

“There are particular automated strategies that have been identified by regulators which, if carried out, are likely to constitute market abuse,” the European Commission document says. “Further identifying abusive strategies will ensure a consistent approach in monitoring and enforcement by competent authorities.”

Among other strategies, the Brussels-based commission specifically targets:

  • Layering: in which traders place large orders they have no intention of allowing to go through,
  • Quote stuffing: in which investors seek an advantage by delaying data feeds, and
  • Spoofing: in which market participants try to trick other computers into making decisions that can be exploited for profit.

Read the Bloomberg article here.

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The risks posed by high-frequency trading

HFT, which accounts for two-thirds to three-quarters of all Wall Street volume, seems to have led to smaller spreads (the gap between bid and offer prices).
But as Andrew Haldane of the Bank of England pointed out in a speech last month, HFT firms may be benefiting at the expense of other investors.
Instead of being better informed about a company, HFT outfits are simply seeing and acting on market prices sooner than competitors. ”
The problem may be that, unlike market-makers, HFT investors have no obligation to trade in difficult conditions. ”
Although the market righted itself quickly, regulators are debating ways to step in when prices go haywire.

Source.

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The changing landscape of India’s equity markets – the bots are here

About 60% of orders into the country’s main exchange are coming from co-located servers shows that high-frequency trading has come onshore in a big way. High-frequency traders tend to stick to liquid stocks and liquid derivatives contracts. Hence, they haven’t yet contributed meaningfully in enhancing liquidity of the other stocks and illiquid derivatives contracts such as stock options while greatly increasing the volatility of the most liquid names.

Combined with the dismantling of SEBI’s existing team, the market is at risk of being swarmed by the bots.

via The changing landscape of India’s equity markets – livemint.com.

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