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Thomas in Blockland

Thomas the crossing network wasn’t happy. For years he had enjoyed helping his friends buy and sell things amongst themselves. Sometimes he would even step in directly and agree to buy or sell something himself, especially if there was an awful lot of it. But now he had a tricky choice to make. The ruler of the land, The Regulator, had been convinced by the Exchanges that... Read More

Bumpy road ahead?

Interesting story in the FT today about IEX and its application to become a fully-fledged exchange. At issue is IEX’s so-called ‘speed bump’ that will slow down the HFT ‘boy racers’ and so make markets safer again. Naysayers claim that the inclusion of a speed bump is contrary to the rule that investors should have “immediate” access to the... Read More

The Tomorrow People

Josh was in high spirits, trading had been good that day. He had downloaded an algo app overnight that allowed him to arb Google dollars against Apple iCoins. It was no longer any use, of course, as by now everyone else had downloaded it too. But his edge had been that his simulator had processed it faster than anyone else. This was required by the regulator to check it contained... Read More

GMEX – going to eleven?

The announcement that new derivatives exchange GMEX has received investment from SocGen reopened the debate here as to the future of rates trading and who the likely winners are going to be. Reliable data is hard to come by on exactly what is happening to OTC volumes and where they are going. Such evidence as does exist seems to show a steady increase in SEF volumes, although this... Read More

Maybe markets are unfair, but are they rigged?

The publication of Michael Lewis’s new book Flash Boys has reignited the whole HFT/dark pool debate (actually, maybe it’s never really gone away). The point people seem to continually miss in this debate is the distinction between “unfair” and “rigged”. To me the term rigged implies some malevolent conspiracy between certain members of an ecosystem... Read More

Not even wrong

Gently easing my way back into the daily grind after my annual vacation I came across the report that MPs in London are proposing to tax HFT. They must have been drinking more sangria than I have over the past few weeks. For a start, any tax aimed at changing behaviour needs to be very clear about what behaviour it is targeting and the preferred outcome it is trying to achieve.... Read More

HFT (High-frequency Taxing)

It’s always seemed like the wrangling over regulation in Europe’s capital markets was, in many ways, a proxy for the broader political debate raging across the region. No surprise, then, that on the eve of today’s speech by David Cameron we saw that the European finance ministers have agreed the creation of a vanguard transaction tax bloc that will implement its... Read More

Is the time up for HFT?

Few can have missed the fact that Germany is set to go it alone on curbing HFT, although it looks like the rest of Europe won’t be too far behind. The proposed European legislation will insist upon a minimum resting time for orders before they can be amended or cancelled. This has sparked a fair amount of discussion here at Fidessa Towers on how it will (or probably won’t)... Read More

Social media and the return of high touch trading

The past decade has witnessed the wholesale electronification of global trading. The term “low touch” was coined to describe exactly this and the electronic routing of client orders to markets with the minimum of intervention from their broker. This meant that the value add of the sales trader was increasingly denuded and the key differentiators became simply cost and market... Read More

Whilst my breath is still warm

Good to see that the HFT community is finally starting to educate the regulators and policymakers. As we all know, the debate hinges on whether these firms are really acting as electronic versions of traditional market makers and, if they are, whether they should be subject to some of the same formal market making obligations. In particular, regulators have been gnashing their teeth... Read More

Still hacking away at HFT

Had a distinct sense of déjà vu at TradeTech in London last week. Seems like much of the debate and chatter was the same as it was last year – HFT, ill thought through regulation, etc. It struck me, though, that maybe the regulators should let the market decide what is good or bad for us rather than agonising over these issues on our behalf. Take HFT for example. Whilst... Read More

And another thing Europe can’t agree about

Two stories this week demonstrated that Greece isn’t the only thing Europe has to disagree about. Together they both help highlight the problem regulators have worldwide with HFT. The first story, by the FT’s Jeremy Grant, describes how Italy’s Borsa Italiana is bowing to Consob pressure and introducing a fee structure that will charge participants more depending... Read More

Poachers turned gamekeepers

Interesting to read the venerable Leo Melamed’s open letter in the FT this week on HFT and regulators. The CME’s chairman emeritus certainly makes a good point when he says that trying to stifle innovation is both wrong and inevitably doomed to failure, but I am not sure he’s completely right in a couple of areas. First, whilst it’s true that algorithmic or HFT players have... Read More

All I want for Xmas is exchange consolidation/competition (delete as appropriate)

Despite all the announcements, press briefings and other hullabaloo it looks like the BATS/Chi-X deal is the only one that’s actually going to get done this year. SGX/ASX and LSE/TMX are just two of the higher profile casualties in the global game of exchange Monopoly. Add to this the conversations and negotiations that never reached the public domain and you have a dazzling array... Read More

Welcome to FragVision

One of the things that’s been puzzling me is all the conflicting claims around High Frequency Trading (HFT). Depending upon what you read, or who you talk to, HFT is either the scourge of capital markets or the next evolution of finance. That’s why it seemed like an ideal subject for the first episode of FragVision – the new video channel from Fidessa. With each episode... Read More

‘Rebunking’ the HFT myth!

Following yesterday’s request for further papers on HFT, my thanks to Jelle Elzinga, Director and Board Member of Optiver Holding, for sending through his firm’s view and allowing me to share it with the fragmentation community. Not surprisingly, Optiver believes that “HFT is nothing more or less than an evolution of a system that has been in operation for decades.” What... Read More

Debunking the HFT myth

I came across an interesting paper the other day published by GETCO: A Modern Market Maker’s Perspective on the European Financial Markets Regulatory Agenda. The HFT community has come in for quite a bit of stick recently and so it was refreshing to see an intelligent and well argued explanation of its role in today’s financial markets. One of the key points GETCO makes... Read More

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