For Stuart Theakston, Head of Quantitative Research and Automated Trading, GLC Ltd, of the biggest misconceptions are that high-frequency traders are some-how 'taking advantage' of other investors; this is entirely bogus, he says. "They are actually getting paid, in a very competitive market, to provide a service to other investors (that service is immediate liquidity)."
Mr. Theakston, one of the leading high-frequency traders featured in Edgar Perez's The Speed Traders: An Insider's Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World (www.thespeedtraders.com), manages all research and development for the quantitative models and trading systems. He started with GLC Ltd. in 2008 heading the high-frequency trading desk. Prior to GLC Ltd., Mr. Theakston founded a quantitative proprietary trading business deploying equity long/short strategies. Mr. Theakston has also worked at Merrill Lynch and Deutsche Bank, with responsibility for delivering quantitative trading tools and high performance execution products to hedge fund clients and internal trading desks.
He continues: "As usual, the media and the public fail to understand that this is a competitive situation where abnormal risk adjusted returns are being competed away by a large number of market participants. The media fail to understand this in pretty much every context, as the 'greedy company taking advantage of innocent consumers' story is all too common. They also fail to understand the amount of intellectual and technology infrastructure required to engage in high-frequency trading and so think high-frequency traders are getting a 'free lunch'. In actual fact, they are just eating each other's lunches in an ultra competitive frenzy that ends with a large number of them being unable to cover their fixed costs and going out of business, leaving a few very competitive outfits making only normal profits. This is how competitive markets are supposed to work, and is what institutional/retail investors should want."
The Speed Traders,www.TheSpeedTraders.com, published by McGraw-Hill Inc., is the most comprehensive, revealing work available on the most important development in trading in generations. High-frequency trading will no doubt play an ever larger role as computer technology advances and the global exchanges embrace fast electronic access. The Speed Traders explains everything there is to know about how today's high-frequency traders make millions-one cent at a time."
Mr. Perez is widely regarded as the pre-eminent networker in the specialized area of high-frequency trading. He is the founder of Golden Networking and host of High-Frequency Trading Happy Hour business receptions (www.hfthappyhour.com) in New York City, which have drawn the world's top industry practitioners. He has been interviewed by CNBC, TheStreet.com, Bloomberg and Channel NewsAsia, and engaged as speaker at Harvard Business School's 17th Annual Venture Capital & Private Equity Conference, Columbia Business School's Career Management Center and Alumni Club of New York, High-Frequency Trading Leaders Forum 2011 (New York, Hong Kong, Chicago, Sao Paulo, Singapore), CFA Singapore, and Hong Kong Securities Institute, among others prestigious forums. Mr. Perez is one of the great business networkers and motivators on the lecture circuit; he is available worldwide for the following speaking engagements: Present and Future of High-Frequency Trading, The Real Story behind the "Flash Crash", Networking for Financial Executives, and Business Networking for Success.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.