Brazil Embraces High Frequency Trading - Do You?

The trading business feels like a fight, now as ever, with the threat of sweeping regulations as the most pressing concern of the moment.  This business even sounds like a war, too - with algorithms names like "Raider" and "Sniper;" and with terms like "dark pools," and "low latency arms race" drawing focus from regulators and media alike.  But the war-like aspect remains because trading is a highly competitive business. 

The imperative to increase market share will remain a top priority this year along with risk management and regulatory compliance, and the technology required to compete is available to everyone.  As Apama has expressed before here, the markets are still driven by those with the flexibility to quickly adapt to new regulations, the insight to understand new market behaviors, and the imagination to conceive a trading strategy that can capitalize on the opportunity.  It's no wonder that the relatively small number of firms using high frequency trading strategies are responsible for over 70% of US equity trading volume.  These pressures push the rest of the capital markets in the same direction and the trend is unlikely to reverse. 

On February 8th 2010, Apama announced that Banco Fator Corretora, a Brazilian bank and brokerage firm, has deployed the Progress® Apama® Algorithmic Trading Accelerator. Apama plays a critical role in Banco Fator’s new electronic trading strategy, enabling it to more effectively develop high frequency, proprietary trading tactics, achieve rapid customization, and perform low latency execution of trades on behalf of its buy-side clients.  Banco Fator is also working with its clients to design customized algorithmic trading strategies that provide them significant competitive advantage, and the bank explicitly emphasized the importance of providing its clients with a fast method to enter the high frequency trading business.

Why so much emphasis on high frequency trading (HFT)?  Reasons will differ among traders and regions, but a short primer on HFT and some ideas are here.  The Brazilian market has expressed a strong opinion on the matter, with over 15 customers deploying Apama internally to automate execution and/or alpha-seeking strategies in the past year-and-a-half, with many further rolling out the platform to downstream clients. 

So, do you have an opinion on HFT as well?  What characteristics should a platform for HFT have to enable you to be more competitive?  Let us know - leave a comment, or take our poll.

-Dan

Comments

[Allen Mass]

Great info. keep posting the good one.

[A Proprietary Trader]

True HFT is fully automated. I have watched in person as a HFT algorithm turned out thousands of orders a second. As a discretionary trader limited by human hand/eye reaction times ~200ms I simply cannot participate at this level even if I wanted to. "Grey box" or semi automated, pre-defined rules that accelerate my decision making process and execution have obviously some overlap into HFT and help me be more competitive.

[jordan 12]

What is the key ingredient of challenging people that enables them to succeed?Why do they endure the hard times when others are overcome by them? Why do they win when other people shed? Why do they soar when other people sink?