High frequency trading boom is past?

By Greg Garvan

High Frequency Trading, HFT, is on the decline, even among the people who spent the past few years heralding its value. Bloomberg Business News reports that in 2009 more then 3.25 billion shares daily (!!!) were traded by HFT; in 2012 that dropped to half that amount, 1.6 billion shares daily. You might remember the “whoops, I slipped” market falls that happened in about 3 seconds and then rebounded a few times in the past few years. That was from HFT. However, what appears to be driving down its use is that the profits have gone out of the business (there has recently been quite an arms race as traders aimed to shave milliseconds off their systems’ response times).

What do we learn from this? I take away that technology and efficiency, in their drive to the razor’s edge of both, can become too efficient, and lose sight of the process while focusing too intently on a goal. This really is a story for our times, when we forget how we want to accomplish something, all in pursuit of just getting to the end.

(tip of the hat to Kevin O’Keefe and FAFN for pointing me to this new info!)

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Greg Garvan

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