High-Frequency Traders Descend onto Forex Markets | Currency Futures


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High-Frequency Traders Descend onto Forex Markets

  #7 (permalink)

 
 
Posts: 1,176 since Nov 2009


kbit View Post
I remember what the markets like the ES were like years ago and with the ramped up HFT activity things became more difficult. Anyway I don't wish to argue this point...How much and to what extent the markets will be affected by increased HFT is debatable. Your guess is as good as mine.

I never paid much attention to futures, to me they were for hedging and nothing more.. never though of being able to trade them.. now, as someone said to me a few weeks ago, if it has a number and the number moves, it can be traded... e.g. Volatility, Variance, etc.

as to HFT on FX...

the biggest issue with FX is the lack of a central exchange and as such the availability a central order book.. that makes true HFT more difficult... the moment FX becomes centralized and a book is available across the board, then it will be easier for HFT to get busy and drive to a more "efficient" market.

Put it this way, and this is not thinking retail since all retail goes through aggregators... there are about 7 major ECN's that transact about $1T daily (Currenex, LavaFX, HotSpot FXi, eSpeed,FXAll, BLP PowerMatch, EBSPrime).. they all provide full depth of book, but only for what they transact..

The HFT shop today has to aggregate all those feeds and via algo(CEP/Model) determine the action to take as they search for arb opportunities or follow their models... the task is not all that simple, and requires lots and lots of technology and capital to trade properly when the opportunity is found. Dont take me wrong, there are shops out there that do this (aka Macro Funds), but they are not HFT given in its purest form, it cant be done on FX today as it is done in equities.

HFT is all over the news now because of the flash crash on may, and the term is now very missused... no HFT shop (IMO of course) can be efficient when they dont know all the information available to the market place..which is what we have on the FX market...

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