Larry Tabb, chief executive of Tabb Group, a consultancy, said high-frequency trading now accounted for 54 percent of overall US equity trading, down from an earlier Tabb estimate of 61 percent in 2009.
The level in Europe fell from 38 percent last year to 35 percent, although Tabb is expecting a small uptick towards the end of the year.
âWe havenât been seeing any big names blow up but itâs more about people downsizing. And weâve seen some people get out altogether.â
A technological arms race is also hurting profitability.
Peter Nabicht, executive vice-president at Allston Trading, a Chicago-based proprietary trading firm, said: âIt is getting harder. Youâre seeing competition expand like crazy and we are taking a big hit on our margins because of the investment we make in our systems. I wouldnât be surprised to see some HFT firms being bought.â
He added that the growth of âdark poolsâ and other private networks where prices are not displayed publicly had reduced trading opportunities.
âWe have less flow to interact with so the flow we interact with we have to handle better.â Robert Hegarty, global head of market structures at Thomson Reuters, said that high post-trade costs in Europe relative to the US was âa significant inhibitor to growing this [HFT] businessâ.
Rutger ter Hoeven, marketing manager at Interxion, which runs data centers where high frequency traders can put their trading systems, said profits were down at many trading firms based in Amsterdam, the largest community of HFT firms in Europe outside London.
âIn Amsterdam weâve seen some of the market-makers come under pressure,â he said.
One such firm, Alpha Bay, went out of business in recent months while one of the largest options trading firms, All Options, has left the floor of the Amsterdam Stock Exchange, where it based its electronic trading, and has cut staff.
