Entries filed under 'High-Frequency Trading'

    High-Frequency Trading: The Co-Location Advantage

    May 22, 2014 10:20 AM by Ted Oberhaus

    When you’re trading at the speed of light, close proximity to an exchange matters—a lot.   

    A Trader's Perspective

    Speed is important to high-frequency traders. It has been estimated that a one-millisecond advantage can be worth $100 million a year to such trading firms. In fact, the need for speed is so intense, that even the length of the cable between a trader’s desk and the exchange data center can be a matter of concern.

    It’s all about reducing latency.

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    High-Frequency Trading: Who Knows What, and When?

    May 15, 2014 11:27 AM by Ted Oberhaus

    No one’s asking for equal outcomes in the marketplace, just an equal footing at the starting gate.

    A Trader's Perspective

    If an exchange offers early access to market data to those willing and able to pay for it, is that a bad thing?

    Not necessarily, some would argue. After all, exchanges are profit centers. Selling data is part of their business description. And if some investors invest more to generate a competitive advantage, what’s wrong with that? Many investors have the resources to acquire one type of edge or another in the markets.

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    High-Frequency Trading: What Do Predatory Order Types Have To Do With Investing?

    May 8, 2014 4:47 PM by Ted Oberhaus

    Exchanges have created hundreds of order types that benefit the predatory practices of high-frequency traders

    A Trader's Perspective

    Most investors are familiar with the concept of an order type, which instructs a trader to enter or exit a position. Common order types include the stop-loss order, which attempts to limit trading losses by drawing a “line in the sand” past which traders will not risk any more money; the limit order, which is an order to buy (or sell) at a specified price or better; and the market order, which instructs the trader to buy (or sell) at the best price that is currently available. Many investors think of these three order types as their main options. But the exchanges have created many more order types—hundreds upon hundreds of them—and many of them are not fully understood.

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    How Did We Get Where We Are Today? A Suspect Emerges.

    May 1, 2014 2:28 PM by Ted Oberhaus

    In this second of a series on high-frequency trading, Ted Oberhaus looks at Securities and Exchange Commission [SEC] Regulation National Market System (Reg. NMS), enacted in 2005 and fully implemented in 2007.

    A Trader's Perspective

    Remember the good old days when you could practically count the number of U.S. stock exchanges on one hand? There was the NASDAQ, the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and the Chicago Stock Exchange (CSE). Today, the AMEX has been merged out of existence; the wood paneling of the CSE’s trading floor has been curated to the Art Institute of Chicago; and the NASDAQ and the NYSE are filling only a fraction of the U.S. stock orders they used to.

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    High-Frequency Trading: A Little Less Frenzy, Please

    April 24, 2014 10:05 AM by Ted Oberhaus

    High-frequency trading may be the villain du jour when it comes to selling books, but we’ve had some of our best minds on the subject since 1999. 

    A Trader's Perspective

    Can a trading strategy that involves holding stocks for milliseconds to minutes, or that has no intrinsic interest in the companies behind the stocks, actually be considered investing? Few would argue that it is. In fact, most would say it is pure speculation. Does that make it bad? Actually, high-frequency trading (HFT) is a complex issue that deserves more thoughtful consideration than the recent media frenzy about HFT allows. 

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