HFT Myths

Quote from hft:

If by consolidated you mean some 3rd-party feed that consolidates endpoints then yeah I think it's too slow for pure HFT trading (rebates, scalping, inter-exchange arb).
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By consolidated I mean the CTA & UTP equity feeds as opposed to processing exchange feeds directly.
 
Excellent thread - many thanks. You have to wade through a lot of garbage on this site to pick out the gems, but's worth it :)

Is it true that exchanges keep a unique serial number for each customer (for compliance reasons) and that hft's have access to these numbers (so that, for example, they can keep track of an individual customer's positions)
 
Quote from stanage:

Excellent thread - many thanks. You have to wade through a lot of garbage on this site to pick out the gems, but's worth it :)

Is it true that exchanges keep a unique serial number for each customer (for compliance reasons)
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Maybe/probably.
Quote from stanage:
and that hft's have access to these numbers (so that, for example, they can keep track of an individual customer's positions)
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Hell no. At least not that I've ever been told, heard of, or found. Some exchanges will show you the clearing firm behind orders. Some will show you the unique order id of the order you're matching against. So you could match up who you're trading against and analyze the edge on their flow. But I've never seen one where you can see the customer id on a time & sales feed.

Not ruling it out - there might be someone out there who's discovered some unique identifier that I haven't, but I sure have not seen it done.
 
Quote from mr19:

By consolidated I mean the CTA & UTP equity feeds as opposed to processing exchange feeds directly.
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Yeah that would be too slow for the type of HFT trading we've been talking about on this thread.
 
Finally had a chance to read this thread. Thanks OP.

I was at one of these HFT firms in Chicago before they were HFT (or right when they started). Year 2000. A T1 line was huge back then. We programmed generic Playstation controllers to trade ES vs. the big contract arbitrage. Also basket of stocks vs. ES if anybody remembers that.

Now they are one of the biggest in the biz. I heard my old boss donated something like 20 million dollars to a hospital when his daughter was injured and they helped her. He didn't have that much when I was there so holy crap HFT made a lot of people very very rich. No idea what it is like now but it was fun back the, almost as fun as the floor.
 
Please excuse my asking a few very basic questions about HFT, as it is fairly new here in Japan.

Even though HFT was being used in Nikkei Futures during the current run that started in Novemer, it really wasn't that noticable in regards to volatility on the way up. However, during the last 7 days of declines it is quite obvious. Fewer orders to absorb the HFT volume would, of course, be the cause.

I only know what I've read about HFT in the U.S. as to how it has caused problems for the scalpers. I am not a scalper ,but trade
off 1 minute charts.
Going over the 1 minute and less charts for the last 7 days, in addition to following Nikkei Futures realtime, I can not see any difference in the trends, other than fewer/shorter consolidation periods, from the days before HFT. So, am I correct in gussing that the HFT programs do not take the immediate trend (defined by TA) into consideration in their designs?And that their area of concern is only the next few ticks? To me this appears to be so, as while the programs do accelerate normal trending, I see numerous price spikes both in the trend direction and also against it. Normally there would not be such large and frequent price spikes against the trend.

From what I can see I will have no trouble trading as usual even while HFT is running, as it does not appear to effect the trends. But as I have only 7 days of data to base this belief on, I wanted to confirm that TA is not part of the programs.

Thank you for any information you may provide.
 
Quote from hft:

Without going into specifics on fees or products I think an individual can make about a grand a day with this setup fairly reasonably. With the experience I have, I'd probably aim for somewhere in the neighborhood of $5-10K/day on certain products...and most likely slip to about half that much...or into the red once I come across unexpected problems that I take for granted being resolved for me by other people now.
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What are the typical HFT percentage returns on capital invested like?

Interesting thread. Thanks for the effort.
 
Quote from QuantWizard:

Here's my question, which is more "philosophical": Why deploy HFT strategies at all? The primary (only?) advantage seems to be speed, which is basically a technological arms race and depends less on the sophistication of the strategy itself, meaning that whatever advantage you have for the moment will surely fade away, even in the short term.

So what are the pros, in terms of KPIs (e.g. ROI, sharpe etc.) vis-a-vis say "medium" frequency trading (e.g. intraday)? Would you consider your competitive advantage in your ability to _renew_ your strategies, rather than the strength of individual strategies?
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Flip the question on its head...

Why not promote HFT? Especially if you're a "tool" supplier.

My gut feeling - the HFT is a mania, just the same as the dot.com boom, the California gold rush, etc.

The ones who got really rich were the tool suppliers. In this case, the companies selling the co-lo space, the hardware, the leased lines, the data feeds, the programmers, etc...

Meanwhile, all the pikers are trying to pick up dimes and nickels faster than the next guy, by spending more and more dollars to make less and less pennies and nickels...

HFT is just an arms race...

Just wait - HFT will implode because the rewards will shrivel while the costs skyrocket...
 
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