29 May 2013 – Most of us have been following the regulators’ struggle to meet the challenges posed by high-frequency trading (for an excellent infographic on HFT click here). This ultra-fast, computerized segment of finance now accounts for most trades. HFT also contributed to that infamous “flash crash” back in 2010, the sudden, vertiginous fall in the Dow Jones Industrial Average. However, the HFT of today is very different from that of three years ago. This is because of … yep … our “new new” friend “Big data”. And financial markets are notorious producers of big data: trades, quotes, earnings statements, consumer research reports, official statistical releases, polls, news articles, etc.
Companies that have relied on the first generation of HFT, where unsophisticated “speed exploits” price discrepancies, have had a tough few years. Profits from ultra-fast trading firms were 74 per cent lower in 2012 compared with 2009, according to Rosenblatt Securities which tracks this sort of information for its institutional clients.
NOTE: In the hacking world an “exploit” is a piece of software, a chunk of data, … Read more