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"There was this mythology that you could get 90 computers, some Harvard PhDs, and you would turn...

  • Monday, October 15, 2012, 11:42 AM ET
    "There was this mythology that you could get 90 computers, some Harvard PhDs, and you would turn on your machines and make money." High-frequency trading is falling in on itself, with industry profits expected at just $1.25B this year, off 35% from last year and vs. $4.9B in 2009. Informal data suggests firms are cutting staff and HFT now accounts for 51% of trading, down from 61% three years ago.
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This news story has 10 comments:

  •  
    HFT is not "trading"...It is skimming off the top and, IMHO, should be considered fraud...It provides NO value to anyone expect to the few that become very wealthy by playing outside of the boundaries of ethical behavior.
    15 Oct 2012, 11:46 AM Reply Like
  •  
    Lint is my new favorite commenter!
    15 Oct 2012, 11:51 AM Reply Like
  •  
    It's not unethical or illegal, it's just not useful economic behavior. In the end, the market will tend toward equilibrium and profits of HFT will drop.

    Some degree of legal limitation wouldn't be a bad idea though.
    15 Oct 2012, 12:06 PM Reply Like
  •  
    Adding a buffer to slow things down might help...but who knows. If they proffer new regs I can guarantee that someone will game them for their own advantage eg the no short sale on a downtick rule that only helps stock touts. Right now HFT is only taking about $1B out the trade so it's actually probably doing more good (liquidity) than harm right now.
    15 Oct 2012, 01:03 PM Reply Like
  •  
    HFTs are not designed for investment, but (as Lint) says, "skim." HFTs have destabilized the Market to the point many investors have sidelined. As to adding liquidity, forget the volumes, and watch the NET loss/gain. Plus, HFTs have a tumbling effect, taking a stock down, but rarely adding. I'd still like to see the uptick rule reinstated, time limits for holding stock (even just minutes) and yes, even a transaction tax on extremely short-term holds, in order to reduce manipulation.
    15 Oct 2012, 05:48 PM Reply Like
  •  
    How is it only 'taking a stock down, but rarely adding'? For every seller, there is a buyer. The endgame is that when everyone is in it, money to be made in it dries up.
    16 Oct 2012, 09:03 AM Reply Like
  •  
    The mistake is watching the volume and assuming liquidity because total volume is high. Actually, the high volume is only an indicator of HFT action. Again, watch the NET at the end of the day. "Money dries up" (just as you say) when actual investors see the futility in trading with high frequency computers. imho.
    16 Oct 2012, 09:27 AM Reply Like
  •  
    If you are an investor and are upset about fighting HFTers about $.001 per share you are really a trader trying to fight robots. Spreads are so thin right now, it's silly to be upset.
    16 Oct 2012, 09:42 AM Reply Like
  •  
    Silly? Well, whatever. But consider HFTs make up 70% of the total Market and consistently rake off the top, otherwise known as "skim". And that it's only my humble opinion.
    16 Oct 2012, 09:49 AM Reply Like
  •  
    The profitability of doing what everyone else is doing results is profits drying up. If HFTs and short term trading become the market norm, long term contrarian would suggest buy and hold will outperform this over next 10 years. Hedge funds have done worse than SP500 for at least a year, is this just a start?
    17 Oct 2012, 09:04 AM Reply Like
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