High Frequency Trading

[wemakebread]

Just in case you have not heard of HFT, it is time to take notice.

HFT is one of the secret weapons that Goldman Sachs uses to make a lot of money, and it has the potential to disrupt the market in unexpected & even irrational ways.

HFT is actually an unfair advantage that large institutions & brokers wield over small retail investors. The computers can actually pick up & transact at bargain prices before the human traders even realize what is happening.

With HFT, short-term speculators will have the odds heavily stacked against them.

Fortunately, for long term value investors, HFT should not affect them too much. Unless another financial tsunami turns everything upside down.

Above are just my views. Sharing for mutual learning.


05:55 AM Feb 11, 2010 TODAY
SINGAPORE - The growth of high-frequency trading may be lagging in Asia versus the United States, but it is a market set to grow in the region, according to market participants.

High-frequency trading (HFT) involves buying and selling of millions of stocks in fractions of a second using complex software.

Such trading activity requires stock exchanges to upgrade their trading platforms to allow for high-speed and high-volume trades to be executed.

Trading shares in mere milliseconds is a growing phenomenon and global exchanges are starting to take notice.

Some bourses like Japan and Singapore are already adopting new technology to cater to demand for high frequency trading by sophisticated investors.

Earlier this year, the Tokyo Stock Exchange launched its new and faster trading engine, Arrowhead, for equities and bonds.

The move catapulted Japan up to the level of more developed capital markets in the US and Europe.

Arrowhead cut order response time for trades from 3 seconds, to 5 milliseconds, which enabled more high frequency traders to operate on the Tokyo borse.

Singapore's SGX is also planning to tap on opportunities in HFT, which has increased from next to nothing two years ago to about 25 per cent of derivatives trade now.

"As an exchange we are very interested in HFT. The worst thing for any investor is that when they get into the market, they can't get out. But the concept of HFT, the participants will provide a tremendous amount of liquidity in the market place and help grow volumes. For us that's a benefit," said Chew Sutat, Executive Vice President and Head of Market Development at SGX.

Overall, analysts say HFT in Asia is still in its infancy but regulators in the US and Europe are already watching how the phenomenon will develop.

"HFT will definitely add to liquidity, that's not a question, but when it takes over the market like it has in the US, like 60 per cent for HFT, then that will be a problem, regulations and the whole HFT industry would have to be regulated," said Moh Tze Yang, lead analyst at SIAS Research.

For investors, analysts say HFT will result in positive things like lower bid/ask spreads and easier access to buying or selling in markets.

[wemakebread]

Oops, forgot to post the link
http://www.todayonline.com/Business/EDC ... -grow-here

[Dennis Ng]

Just in case you have not heard of HFT, it is time to take notice.

HFT is one of the secret weapons that Goldman Sachs uses to make a lot of money, and it has the potential to disrupt the market in unexpected & even irrational ways.

HFT is actually an unfair advantage that large institutions & brokers wield over small retail investors. The computers can actually pick up & transact at bargain prices before the human traders even realize what is happening.

With HFT, short-term speculators will have the odds heavily stacked against them.

Fortunately, for long term value investors, HFT should not affect them too much. Unless another financial tsunami turns everything upside down.

Above are just my views. Sharing for mutual learning.


05:55 AM Feb 11, 2010 TODAY
SINGAPORE - The growth of high-frequency trading may be lagging in Asia versus the United States, but it is a market set to grow in the region, according to market participants.

High-frequency trading (HFT) involves buying and selling of millions of stocks in fractions of a second using complex software.

Such trading activity requires stock exchanges to upgrade their trading platforms to allow for high-speed and high-volume trades to be executed.

Trading shares in mere milliseconds is a growing phenomenon and global exchanges are starting to take notice.

Some bourses like Japan and Singapore are already adopting new technology to cater to demand for high frequency trading by sophisticated investors.

Earlier this year, the Tokyo Stock Exchange launched its new and faster trading engine, Arrowhead, for equities and bonds.

The move catapulted Japan up to the level of more developed capital markets in the US and Europe.

Arrowhead cut order response time for trades from 3 seconds, to 5 milliseconds, which enabled more high frequency traders to operate on the Tokyo borse.

Singapore's SGX is also planning to tap on opportunities in HFT, which has increased from next to nothing two years ago to about 25 per cent of derivatives trade now.

"As an exchange we are very interested in HFT. The worst thing for any investor is that when they get into the market, they can't get out. But the concept of HFT, the participants will provide a tremendous amount of liquidity in the market place and help grow volumes. For us that's a benefit," said Chew Sutat, Executive Vice President and Head of Market Development at SGX.

Overall, analysts say HFT in Asia is still in its infancy but regulators in the US and Europe are already watching how the phenomenon will develop.

"HFT will definitely add to liquidity, that's not a question, but when it takes over the market like it has in the US, like 60 per cent for HFT, then that will be a problem, regulations and the whole HFT industry would have to be regulated," said Moh Tze Yang, lead analyst at SIAS Research.

For investors, analysts say HFT will result in positive things like lower bid/ask spreads and easier access to buying or selling in markets.

thanks for your sharing.

Now, people realised why I say I don't trade short term. Becos we are either having full time job or full time business, how are we going to "compete" against Professional Traders with their hardware, software, information, plus financial backing of their employer (eg. Goldman Sachs)...

This is why in year 2009 I started to conduct seminars. Becos I really cannot stand ALL these seminars out there teaching people to trade short term. All of my sifus (multi-millionaires in Singapore) Became Rich Through INVESTING into stocks and properties, not through short term trading.

I myself built my first million through investing, and this year, I'll be reaching S$2 million soon. As they say, the First Million is always the most difficult, thereafter, it gets easier, becos with time, one's experiences, knowledge and skills improved.

[findleowong]

If any of you have watch the series “Wall Street Warrior”. You will have a clearer picture, how those traders trade in the US market.

[wemakebread]

while searching thru my email archives, I found 2 similar articles on HFT

New York Times, 23 Jul 09
http://www.nytimes.com/2009/07/24/busin ... ml?_r=3&hp

Columbia Journalism Review, 24 Jul 09
http://www.cjr.org/the_audit/the_times_ ... requen.php

These articles also help to explain in greater detail how HFT works.
Hope this is useful