CME Group vows to tackle loophole being tapped by HFT firms

CME Group vows to tackle loophole being tapped by HFT firms

CME Group says that it is working to close the time gap that sometimes exists between customers receiving trade confirmations and the information appearing in public data feeds after the Wall Street Journal reported that high-speed traders are exploiting the lag.

According to the WSJ, high-frequency traders on the futures market are cashing in on their ability to see when their own orders for some commodities are executed milliseconds before the rest of the market.

The firms are getting a head-start of up to 10 milliseconds on the public because they are plugged directly into the CME computers. They can then use this information to structure their orders so that the confirmations tip which direction prices are moving.

HFT outfit Jump Trading told the WSJ that traders have known about the latency issue for years and have incorporated the information in their trading strategies.

In a statement, CME Group confirmed that out of the more than 300 million messages that come into its platform every day "there may be times when customers can experience a latency of a few milliseconds between the time they receive their trade confirmations and when that information is accessible on the public feed".

However, the exchange operator insists that "these instances are not consistent and vary across asset classes".

It also says that it is working hard to improve its technology, pointing to recently revamped match-engine hardware and plans for a host of upgrades in the next few months designed to "reduce potential discrepancies in processing times".

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