The blink of an eye is a lifetime for HFT algos
Saturday, October 6, 2012, 2:24 PM
In the blink of an eye, the market moves what used to take humans thirty minutes.
High frequency trading (HFT) deeply concerns Eric Hunsader, founder of Nanex. He worries that today's investors, our regulators – heck, even the HFT algorithms themselves – don't fully understand the risks market prices face in the brave new era of bot-dominated trading.
For instance, Hunsader estimates that HFT algorithms are responsible for 70%(!) of all completed transactions on our exchanges, and for 99.9%(!!!) of all exchange quotes.
The pictures of trading floors you see on TV, where the people in bright jackets appear frantically busy in making their trades, have no bearing – claims Hunsader – on the actual trading action. The real action happens across fiber-optic cables, on racks of servers in cooled rooms, where an arms race defined by cable length and switching speeds is being waged
The reality is that the machines have taken over. » Read more