High Frequency Trading driving the need to build quickly, run fast
Posted by Louis Lovas
In just about any race there is usually a starting point and a finish line, unless of course you are in an arms race. For that sort of race there may have been some nebulous beginning in the distant past, but there is no finish line. The race just keeps sprinting along, each competitor angling for an edge, regularly recharging their ammunition supply with some new weaponry to get ahead however slight or temporary.
I recently read an interesting article describing High Frequency Trading as embroiled in an arms race. I certainly believe it's well entrenched in such a conflict, but frankly this combat has arguably had a beneficial net effect especially in that it's contributed to the wellspring of invention, inspiring the creative spirit in all the supporting attributes that make High Frequency Trading a reality. Behind any trader (and trading firm) is an entire armada including the vendors supplying the underlying hardware, networks, software platforms and trading applications. They are all immersed in the war. As new hardware, software and/or algo's are deployed it allows the trader to do battle and speed ahead even if it's just for a short while. Competitive pressures, increasing market volatility, regulatory imperatives, risk mitigation and a host of other challenges are the land mines and roadside bombs on the long and winding road that stall and slow causing re-tooling and re-stocking the ammunition (i.e. algo strategies). There is no time to stop and catch your breath or stand on the roadside.
Sang Lee from the Aite Group reports that High Frequency Trading has had a significant impact on the overall market, providing greater liquidity, tighter spreads and overall improving the quality of the market. At the macro level these are great advancements and mark a natural evolutionary step due to so many market changes in recent years (i.e. electronic trading venues, adoption of CEP platforms for algo trading, etc.) in Equities and beyond (i.e. FX and Futures & Options). Down in the trenches, the battles rage on day by day as a multitude of traders and an untold number of algo strategies provide the market liquidity by moving in and out of positions in milliseconds (or even less time). The trading firms engaged in this never ending conflict drive a set of imperatives on software infrastructures for building and deploying algos in the High Frequency battlefield:
Rapid development and customization of algo's
Abstracting over increasingly complex strategy logic
Support for the 'ilities (availability, security, reliability, ...) to manage the mundane
Support for scalable performance, providing high throughput and low latency
The pre-recorded webinar, is available here: Apama Algorithmic Trading Accelerator, Build Quickly, Run Fast.
Once again thanks for reading (plus watching and listening to the webinar in this case), you can also follow me at twitter, here.