21 October 2014

Milo

Miloslav Hoschek - Miloslav Hoschek Consulting

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Payments strategies 2015-2020-2030

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Q HFT in a 2030 world of negative interest rates

15 July 2014  |  1259 views  |  0

Each millionth of a second is commercially counted through HFT (high frequency trades) deals. Accompanying phenomenon of global HFT infrastructure is  a  commercial supremacy race. The debate on spectrum handling HFT argued that U.S. stock and commodity market is like a casino, where large investors are manipulating the market.

It is estimated that HFT cover up to 70% of transactions in U.S. bonds and more than half of securities transactions in Europe. More than two thirds of the American financial industry participants believe that HFT shops are not fair, corrupt market, diverting attention from the real liquidity and reduce the security of the global financial system. Critics HFT shops fending off long-term investors, they run away from the dark HFT contract, with limited transparency and devastating commercial activities.

HFT architecture

Traders are equipped with a robust servers, with "fast" processors ( multi-core Intel X86 architecture, Ivy Bride), where the firmware (BIOS capacity, data memory, codes ) runs motherboard. This enables a dramatic effect on HFT/ low-latency operations and a significant reduction of errors.

For HFT brokerage firm is obvious access to the latest versions of IT technology (hardware acceleration, CPU , memory allocation, etc.). HFT traders technologically achieved remarkable commercial latency (trade from the network socket line after the user specify the type of call-back) for 400 nanoseconds, which a hundred times faster than orders types of the transactions.

HFT silos need to upgrade every 3 months to capture the pulse of competition between the expanding industry specialist shops in the savage world of HFT in emerging markets and assets of investment funds. Brokers when trading with HFT are frontline conflict inventive ideas with competitors. Information on the technological parameters calculated HFT shops of winning are strictly confidential. The global derivatives exchanges ICE indicated that the HFT data running on technology EPAM / B2BITS FIX Antenna C++

HFT infrastructure

HFT systems are able to predict the direction of markets and shops in creating profit for himself and opposite reaction. Consequently, they are ready to attack in seconds global commodity, foreign exchange and capital markets and corrupting their billions false "fake" HFT orders. Other investors without HFT privileges are technically slower reaction, because at best trade in the range of thousandths of a second. HFT brokers behave very aggressively towards non-participating institutional investors.

HFT trades electronically  catch  and infect most real global commodity and stock markets. HFT trading systems operating in ultra short time values ​​- in millionths of a second. E-pseudo-HFT orders are matched by the billions cause unimaginable amok in global markets. The cost of high speed data connectivity require aggressive model, cost from tens of thousands of dollars a month. HFT model produces profits in excess profit retail investor.

Initial "computer" programs traded high frequency HFT originated at the turn of late 1980s and early 1990s. In the new millennium upgraded generation of advanced trading algorithms. Commands HFT shops are in cents and in seconds they are electronically divided into dozens of thousands of fractions. A few years ago there were orders capped at 50,000 for 1 second or 1 cent. It is not uncommon to high-frequency quasi-shops are hovering and pumping up  to 300 thousand trade orders in 1 second / per 1 cent.

Back door information

Mecca of global HFT trades is New York, it houses 50 largest companies / HFT channels. These few numerous teams (with 20-25 staff), have strong IT background. Through the "back door connectivity", with mega-flows of information brokers are connected to HFT hedge and investment funds. With robust IT backgrounds Side New York HFT brokers can successfully spin the global "running amok" HFT orders at 24 / 7th HFT brokers also operate in Chicago, London and HFT branches are also Prague, Moscow, and Singapore. The arena HFT transactions they enter the other players, for example, increases appetite of global derivatives and commodity exchanges.

According to Bloomberg, the settlement on a matching engine AlgoM2 used for equity and option trades NYSE. Algo Technologies claims that their system AlgoM2 has the lowest latency across the industry and around 16 micro seconds, compared to the London Stock Exchange LSE Millennium, where the platform achieves latency of 124 microseconds. Furthermore, the latency of SW solutionf from Arca, used by New York Stock Exchange has the solution to 500 micro seconds. In the EU after 2016 HFT regulated market. HFT transactions since trillion value of one euro will have to be settled through the Central Securities Depository.

HFT corrupts the market

Series of stock market crashes, including technical slumps in global markets and stock exchanges like London LSE, BATS, Nasdaq and OMX are examples of such criticism. Reviewers HFT markets argue that events such as a sudden fall in stock exchange index DJIA from May 2010 were related to erosive trade orders through HFT algorithms. In May 2010, it was HFT orders that emblased and  and cruelly rev up the spiral of global equity markets. That time had the U.S. stock market evaporate to 1000 billion dollars.

HFT trading much faster than brokers without HFT engine. HFT shops operate simultaneously on 30 different markets is also underway 1000x faster than physical deals. This allows HFT broker unfair advantage. The American and European market are HFT traders sharply criticized the use of illicit information that ordinary traders lack. HFT trade creates unnecessary costs and printing markets perform constant upgrade of its IT trading platforms.

In the modern environment  of HFT are winning rude, but successful traders. They argue that HFT brings to the progressive things. HFT shops supporters argue that it is a natural evolution that extends the width liquidity and margin transactions and conclude that trade in anytime. That's why they pay extra for it investors a better price.

Critics accuse the HFT shops that provide shelter for those markets where the violation of the rules and manipulate. HFT shops create a strictly non-public business environment, acting here is very narrow group of companies that provide overpriced solutions and measures, such as determining the location and priority of the input data of a  controversial HFT shops.

end

picture  -  Franz Xaver Messerschmidt, a German-Austrian sculptor most famous for his "character heads", There is an infinite sadness to the art of his collection of busts with faces contorted in extreme facial expressions... Messerschmidt was  born in 1736,  was headed for a career at the Habsburg court in Vienna, with education: Academy of Fine Arts Vienna Books. Lived  and died 1783 in Bratislava- that times town had the name Pressburg or Possonyi.  

Franz Xaver Messerschmidt was a German-Austrian  sculptor, TagsPaymentsInnovation

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Miloslav Hoschek

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Miloslav Hoschek Consulting

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