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About my Blog -
Lost & Found
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After the last month's alleged theft of Goldman Sachs' proprietary trading code, ArsTechnica published the article "The Matrix, but with money: the world of high-speed trading" about the world of high-speed trading.
In the review, they present an introduction to the current state of art of "high-frequency trading" (HFT).
We all know there are people with great power of fire in the market. But in this overview, it's pretty clear how unreal the market has become.
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Checking the numbers, 3% of the trades are manual, 97% are automated. From the automated trades, "Experts guess that between 60 and 75 percent of the NYSE's daily trading volume are just computers trading against one another using a variety of strategies".
From the article:
- "iceberging" to hide big orders,
- "predatory algos" to identify iceberging,
- "stat arb" to identify correlations and possible arbitrages.
All of these techniques implemented on massively parallel hardware. On the smallest scale, these "algos" run on the high performance processor of the GPU (e.g. NVIDIA).
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So for us, mere mortals, I think our only salvation is that these algorithms work on millisecond scale. They are predictive and accurate to make profits on this time scale. They profit on parts of a cent, and they can't predict or influence the market in a larger scale.
If we think in our time scale: hours, days and months... we are safe...for now.
Source: ArsTechnica, The Matrix, but with money: the world of high-speed trading
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Last Updated ( Tuesday, 28 July 2009 17:04 )
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