Question about High Frequency Trading (HFT)
- Thread starter cloudeleven
- Start date
Anyone can move the market if they got enough cash to do it. The question comes down to 3 qualities associated with moving the market:
1. how quickly they can move the market
2. by how much
3. how long can they keep the market at a price range
HFT can certainly do all three. It just comes down to the measurement for each of the three.
Btw, HFT doesn't mean low latency trading. So holding something in millisecond timeframe doesn't mean that person is HFT.
1. how quickly they can move the market
2. by how much
3. how long can they keep the market at a price range
HFT can certainly do all three. It just comes down to the measurement for each of the three.
Btw, HFT doesn't mean low latency trading. So holding something in millisecond timeframe doesn't mean that person is HFT.
I've seen many definitions of HFT, but I've never seen one that would not include a millisecond holding period. Can you give an example? Pehaps a trade that went off due to trading platform bug? 
The vast majority of HFT volume is simple market making, replacing the trading floor (ever wonder why the NYSE floor looks so dead these days? now you know...). Even the HFT version is a declining business, as volume and spreads continue to shrink. Which is why you see some algo trading shops shutting down.
Many Interactive Brokers customers on this site might be surprised to learn that the parent of the brokerage holds one of the largest, and earliest, HFT's in existence -- Timber Hill -- whose bread and butter is (or was?) options market making. Their founder was an important, early innovator in the space. Unfortunately, IB explicitly reserves the right to send so-called "smart" orders to their HFT unit, without them ever touching a real exchange.