Tag Archives: Artificial intelligence

UK And France Want Ban On High Frequency Trading

Britain and France is planning a crackdown on ultra-fast stock trading that they belive caused the so-called “flash crash” in the US stock market on May 6th this year, alarming both regulators and global investors, Reuters.com report.  Jepp, here we go again. Why don’t we just forbid the whole internet and get it over with…and don’t forget the cell phones!

“My natural tendency would be at least to regulate, to oversee it very strictly and after a cost-benefit analysis of these methods, maybe to forbid it.”

Christine Lagarde

They have the Internet on computers, now?!

 

French Economy Minister Christine Lagarde says the form of computerized trading, known as high-frequency trading (HFT), may need banning in some cases. She’s being backed up by the UK Financial Authorities.

“My natural tendency would be at least to regulate, to oversee it very strictly and after a cost-benefit analysis of these methods, maybe to forbid it,” Lagarde said at a parliamentary commission hearing on financial speculation. Reuters.

“Or at least give market authorities the power to forbid it in circumstances that are considered exceptional,” she added.

Britain, Europe’s biggest stock market, where HFT accounts for about a third of trading on the London Stock Exchange, also signals tougher rules were needed – but emphasise that the rules must be proportionate and targeted.

“HFT was simply the evolution of trading to a much faster pace due to advances in technology,” Alexander Justham, director of markets at the UK’s Financial Services Authority, told a TradeTech 2010 markets industry conference.

Adding: “We are not here to turn the clock back.”

Computerized trading and methods such as algorithmic trading transacts a huge number of shares in microsecond.

“If you drive so fast, the technology should be that you can break as fast as well,” Justham says.

Justham also says, according to Reuters, that HFT has narrowed bid/offer spreads,  but the jury was out on whether it has led to more efficient trading or whether it has created unfair advantages in trading.

Arguing that there’s a key differences between the US and European stock markets, such as controls on who can trade, and the availability of so-called “circuit breakers” to stop the most brutal moves.

“We are absolutely not complacent about the general risk of what all this means. Has the playing field been tilted?” Justham asks.

Well, in this bloggers view it’s the authorities that’s been tilted.

And just to be completely precise: I do definitely see the problems related to high frequency trading. Especially the fact that some market participants are able to get sensitive information before anyone else in the market does, and that’s just plain unfair. However, it’s the exchanges themself who offer this service to selected customers.

So, in my view the regulators should start by regulating themself before they impose yet another set of rules on the investors.

Anyway – Bank of France governor, Christian Noyer, said about the same in front of a French parliamentary panel on Wednesday evening,  that HFT was a real problem.

“I would only see advantages if it was scrutinized as much as possible,” Noyer said.

Read the full story at Reuters.com.

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Here's The Best Place For High Frequency Trading

If any of you oil company executives get a phone call from a financial trading firm who want to rent an oil rig, don’t be surprised. A recent analysis concludes that the best place for high frequency trading in the near future probably is in the middle of the Atlantic Ocean.

“Simply owning or having sovereignty over a certain position on the Earth might turn out to be financially interesting.”

Alexander Wissner-Gross

To exploit the 50-odd milliseconds it takes for information to cross the Atlantic, it turns out that the sweet spot isn’t always at the stock exchange’s door. The best places for extreme high-frequency trading might be an empty lot in Uzbekistan, a barge anchored miles off Chile’s southern coast or on a floating device in the middle of the Atlantic Ocean, according to the analysis.

The analysis,  to be discussed at High-Frequency Trading Experts Workshop 2010 organized by Golden Networking in November and December, tries to pin point the precise locations between the world’s major securities exchanges for gaming at the speed of light.

In today’s markets, computers search for and act on relevant information in a flash, sending orders through fiber optic cables at nearly the speed of light. By buying or selling shares split seconds ahead of the rest of the market, holding stock for mere moments and then doing it all again, high-frequency traders are turning fractions of pennies into piles of dollars, UltraHighFrecuencyTrading.com writes.

To trim the time lapse in this extreme markets, firms will even buy space for their computers as close as possible to an exchange’s computers, a practice called “co-locating” that cuts data travel time, giving some traders an edge.

But to exploit the 50-odd milliseconds it takes for information to cross the Atlantic, it turns out that the sweet spot isn’t always at the exchange’s door. For some assets sold on more than one market, such as the New York and London stock exchanges, the money-making spot is in the middle of the Atlantic Ocean, researchers report in a paper to appear in Physical Review E.

The team figured out primo locations for performing particular trades on the world’s 52 major securities exchanges.

The analysis considers the speed-of-light delay between exchanges, and characteristics of the exchanges themselves, such as volume and frequency of trades.

“‘One surprising feature is that a lot of these optimal positions are in the ocean or other poorly connected areas,” says study coauthor Alexander Wissner-Gross of the MIT Media Laboratory.

“Simply owning or having sovereignty over a certain position on the Earth might turn out to be financially interesting.”

But some choice of spots, such as Los Angeles, are already well-connected, says coauthor and mathematician Cameron Freer of the University of Hawaii at Manoa. For trading some stocks sold on both the New York and Tokyo exchanges, the ideal location is probably already wired.

However, even for hot spots with preexisting infrastructure, it’s unlikely anyone will take advantage of this money-making map anytime soon, according to computational finance expert Michael Kearns of the University of Pennsylvania in Philadelphia.

Related by The Swapper:

Hey, You HFT Bashers! Are You Ready For This?“Artificial Intelligence” To Be Implemented In HFTThe Ultimate Trading WeaponHFT Turns To Low Liquidity StocksDerivative Trading Just Keeps Getting Bigger
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Understanding High Frequency Trading

High Frequency Trading has been around for a while but has been getting more attention since the unprecedented intraday U.S. stock market crash, known as the flash crash, on May 6th, 2010, when the Dow Jones Industrial Average dropped nearly 1000 points in a half hour before recovering in minutes.

So, what is high frequency trading?

VOA‘s Philip Alexiou reports:

See also: Here’s The Official Flash Crash Report; Scapegoat Found

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The Ultimate Trading Weapon

HFT Turns To Low Liquidity Stocks

Derivative Trading Just Keeps Getting Bigger

“Artificial Intelligence” To Be Implemented In HFT

US Stock Markets Infected By Malicious Software?

Testimony Of A High Frequency Trader

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