Should Asian exchanges adopt high frequency trading systems?
Asian exchanges are not as interconnected as those in the West, so there is a lower chance of a flash crash, so should they go for HFT? July 18, 2012 | Tiah Wen LiThe equity market has changed. What was once a world made up by human traders on the floors of stock exchanges has now been replaced with supercomputers trading at unimaginable speed. High-frequency trading (HFT) – a self-explanatory term – is a strategy that relies on the volatility and quick turnover of many small positions based on the detection of market patterns. As an investment position is usually held for a very brief time, sometimes only seconds; and trades into and out of these positions can surpass thousands of times a day, there is usually no net investment position at the end of the trading day. The technique is usually utilised by proprietary trading desks in large, diversified firms or proprietary firms themselves as very sophisticated technological tools are required to participate in HFT, a type of algorithmic trading. HFT now contributes to 70% of total stock trades in the US. Figures 1. Structural changes to the foreign exchange market (1900s) Figures 2. Structural changes to the foreign exchange market (2000s)
The red lines denote electronic communication; the black lines denote voice communication. HFT = high-frequency trading firm; SBP = single-bank platform; MBP = multi-bank platform; ECN = electronic communications network; Exchange = Chicago Mercantile Exchange, for trades involving FX futures. * indicates prime brokered transactions, which are initiated by the clients but appear (to counterparties) in the prime broker’s name. How does HFT work? Basically, HFT investors leverage the power of algorithms. These artificial intelligence algorith... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Data & Analytics, Exchanges, Markets & Exchanges, Risk & PerformanceData & Analytics,Exchanges,Markets Exchanges,Risk & Performance, Data & Analytics,Exchanges,Markets & Exchanges,Risk & Performance, Keywords:HFT, AMM, Algorithmic Trading, Dodd-Frank, IOSCO, SEC, Volcker Rule, Datuk Tajuddin Atan, Bursa Malaysia HFT, AMM, Algorithmic trading, Dodd-Frank, IOSCO, SEC, Volcker Rule, Datuk Tajuddin Atan, Bursa Malaysia
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