HFT in 2016 and beyond

garachen said:
...

The democratization of the CME has largely been a good thing and was pushed for by HFT firms. Nobody likes spending time, effort and money optimizing ilink connections. Now, also, it's easier for small teams starting from scratch to get a fair shot speed wise. Coupled with the new corporate membership rental option, I've seen several small groups get up and running profitably recently.

Larger (head count) HFT firms still find pretty lucrative niches outside the US.
More...

Largely echo the sentiment here. The leading HFT firms today are far larger than more profitable than I could have even imagined those years ago. But the diversification into different asset classes (both inside and outside of US) have largely happened, i.e., XTX and the FX market.

I actually see more and more IBanks (I can name 3-4 off top of my head) effectively giving up on market making, ceding the liquidity providing business to HFT firms. We are not far from seeing HFT firms with $1B+ in annual revenue (KCG excluded), Optiver just reported 800M+ / yr rev just a month or two ago. I have a personal "rule of thumb" of approx. $1.5M / per head, that I use to measure success of any HFT firm.

Reason there is very little discussion about HFT on this forum is because there are very few people who knows what they are talking about. A lot of "newbies" asking very basic questions that eventually you get tired of answering and getting no useful information in return.
 
rufus_4000 said:
Largely echo the sentiment here. The leading HFT firms today are far larger than more profitable than I could have even imagined those years ago. But the diversification into different asset classes (both inside and outside of US) have largely happened, i.e., XTX and the FX market.

I actually see more and more IBanks (I can name 3-4 off top of my head) effectively giving up on market making, ceding the liquidity providing business to HFT firms. We are not far from seeing HFT firms with $1B+ in annual revenue (KCG excluded), Optiver just reported 800M+ / yr rev just a month or two ago. I have a personal "rule of thumb" of approx. $1.5M / per head, that I use to measure success of any HFT firm.

Reason there is very little discussion about HFT on this forum is because there are very few people who knows what they are talking about. A lot of "newbies" asking very basic questions that eventually you get tired of answering and getting no useful information in return.
More...

I see the same around $1.5 per person. Crazy, I believe Apple is $5m. I'm a bit jealous.

Very little trading related sneaks onto this site nowdays. It's just way too difficult and not worth trying to break through the noise.
 
algonoise said:
I suppose the counterargument to that would be the big shops could just stockpile ports until they hit the jackpot.
More...

CME port creation was free. You could have asked for a few dozen without batting an eye, unless you were a new client or your broker was a large bank.
 
algonoise said:
The HFT space has matured quite a bit and it isn't a rosy picture.
More...

The problem with most industry-wide surveys of revenue is that people have fixed classification boundaries for "HFT" vs "not-HFT". In my mind, there's a moving baseline component that is now at 23 cycles on an FPGA board for order out. Any slower than that and you're no different from a regular quant trading firm because there's no speed innovation over cheap, off-the-shelf commercial products.
 
garachen said:
Crazy, I believe Apple is $5m
More...

I just looked it up, around $2m/employee I believe which is still incredible given the size of their workforce, but what is even more impressive is the fact their net profit is something like $4-500k/employee. Talk about some nice margins in that space!
 
Great responses so far. This thread is bringing out some really knowledgeable practitioners. Thank you for this.

mathgirl said:
The problem with most industry-wide surveys of revenue is that people have fixed classification boundaries for "HFT" vs "not-HFT". In my mind, there's a moving baseline component that is now at 23 cycles on an FPGA board for order out. Any slower than that and you're no different from a regular quant trading firm because there's no speed innovation over cheap, off-the-shelf commercial products.
More...

Although this is probably the right cutoff for where simple trades can win on pure speed, I don't define "HFT" solely based on their speed. Plenty of latency sensitive trades that thrive at commoditized speed but require a bit more cleverness. Maybe a regular quant trading firm to you, but still "HFT" in my mind. For example, I wouldn't consider Virtu to have a speed advantage, but I do think of them as HFT.
 
The harder it gets, the more a team effort is needed to do the work of finding and trading some inefficiency, the more of the gains tend to accrue to the senior management and the less to the individual employees. If you can't say to your boss, "fine, I'll rent a seat and trade it myself if you won't pay me well", you don't have much negotiating power. It's a good time for the existing HFT firm owners; less clear it's a good time for new people to get into the business.
 
Senior mgmt is probably overpaid for their roles at an HFT but isn't that the case with many industries? And a lot of those guys built their businesses from the ground up so they can enjoy the scale and maturity now. Also junior and midlevel employees are still compensated well at big shops. Guarantees on par with Google, Facebook, Amazon. For those interested in quant trading, it's pretty reasonable. No way anyone green would have the infrastructure, fee schedule, and capital to compete on their own. New firms are being started by experienced professionals/teams with access to capital after they take their garden leave.
 
You must log in or register to reply here.
Back
Top