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Looking at the tape: High frequency trades? Where are they?


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Looking at the tape: High frequency trades? Where are they?

  #1 (permalink)
Paris + France
 
Experience: Advanced
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This observation is worth for stocks, eminis....
Looking at the tape, the times and sales list of transactions..... where are the high frequency algo trades?

It's common to hear that algos account for 80%+ of all transactions, and that lots of it are high frequency trading making hundreds trades per minutes if not per seconds, even much more.... assuming there are dozens of such robots, the tape should be flooded by inhuman amount of trades.

But it is not the case. The tape never reflects such high intensity of trading from my observations.
There are even some seconds with few trades even in active trading times.

Also if you look at the volume of transactions per minute bar.... we are far far from a world ridden with algos making hundreds of thousands, even millions of transactions per minutes.

So does the tape, as provided by the exchange such as the CME, skips some trades?

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  #2 (permalink)
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Watch the DOM. The orders you see refreshing on the bid and offer are mostly coming from high-frequency market-making algorithms and arbs. If you buy or sell a security, whether a futures contract or a stock, there's a pretty good chance that one of these guys is on the other side of the trade.

Remember also, when you're looking at the tape, or the time and sales, each trade represents two parties to the transaction. One side of the trade might be an individual like you or I, while the other side of the trade may very well be a market maker.

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  #3 (permalink)
Paris + France
 
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Schnook View Post
Watch the DOM. The orders you see refreshing on the bid and offer are mostly coming from high-frequency market-making algorithms and arbs. If you buy or sell a security, whether a futures contract or a stock, there's a pretty good chance that one of these guys is on the other side of the trade.

Remember also, when you're looking at the tape, or the time and sales, each trade represents two parties to the transaction. One side of the trade might be an individual like you or I, while the other side of the trade may very well be a market maker.

Ok you say that the fast algos are placing themselves on the limit orderbook, but it doesn't explain the discrepancy between common saying that high freq algos transacting thousands orders per seconds, and what can be observed in tape and summary of trades per minutes.

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  #4 (permalink)
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brakkar View Post
Ok you say that the fast algos are placing themselves on the limit orderbook, but it doesn't explain the discrepancy between common saying that high freq algos transacting thousands orders per seconds, and what can be observed in tape and summary of trades per minutes.

They are fast enough to be able to refresh in under a millisecond. When one considers the entirety of the stock, currency, futures and options markets, the aggregate volume is indeed likely in the thousands of transactions per second.

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  #5 (permalink)
Paris + France
 
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Schnook View Post
They are fast enough to be able to refresh in under a millisecond. When one considers the entirety of the stock, currency, futures and options markets, the aggregate volume is indeed likely in the thousands of transactions per second.

yes, indeed, the belief that they place thousands of trades per second, is to be taken in market wide arbitrage scale, not individual asset. This is not what I believed.
On the s&P emini, the largest transaction per minute of yesterday occured on the first bar of the regular session with slightly under 10K trades.
We are far, far from the popular belief that high frequency algo trade individual instruments on inhuman frequency.

This global arbitrage renders most technical analysis caduc.

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  #6 (permalink)
Bend OR
 
 
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brakkar View Post
yes, indeed, the belief that they place thousands of trades per second, is to be taken in market wide arbitrage scale, not individual asset. This is not what I believed.
On the s&P emini, the largest transaction per minute of yesterday occured on the first bar of the regular session with slightly under 10K trades.
We are far, far from the popular belief that high frequency algo trade individual instruments on inhuman frequency.

This global arbitrage renders most technical analysis caduc.

Good question/observance! Yeah, I think the whole "HFT" volume is somewhat overhyped, since statistics of HFT are (obviously) including all world markets.

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