high frequency trading

[AviaLaf]

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"Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange (http://topics.nytimes.com/top/reference/timestopics/organizations/n/new_york_stock_exchange/index.html?inline=nyt-org), enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense."

http://www.nytimes.com/2009/07/24/business/24trading.html?_r=1&partner=rss&emc=rss


anybody have any first or second hand exposure to this? what the barriers to building your own trading infrastructure near the NYSE data center might be?:confused2:
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[Avtvivzt]

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just another example of the small and medium guys getting trampled by larger players. you and I can't possibly compete against this.

the last sentence of the article says it best:

“You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price (http://topics.nytimes.com/top/news/business/companies/t_rowe_price_group/index.html?inline=nyt-org), a mutual fund (http://topics.nytimes.com/your-money/investments/mutual-funds-and-etfs/index.html?inline=nyt-classifier) and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”
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[axzhycmv52]

i agree that this type of action compromises the integrity of the market. this is implied and would have gone without saying. in my opinion, the integrity of the market was compromised long ago.. one not need look too far back to find examples of manipulation.

however, i dont yet accept the premise that we can't compete against this.. there is not really much preventing any of us from finding the closest co-lo or lowest latency connection to the exchange machines. IT is a great equalizer.

for those with the skills, software is cheap and relatively easy to develop and the hardware infrastructure is a commodity. perhaps if you sniffed around you may even be able to find these high frequency trading nodes and pattern their behavior. or maybe ive just had one too many red bulls this morning.
:eek2:

[Barbaradak]

I witnessed a great example of this today while watching the tape on Amazon (AMZN).

It started around around 10:20 and just sat there grinding around the 96.60 level for 20-25 minutes.

@smbcapital (http://twitter.com/smbcapital) called this out on Twitter via Stocktwits (http://www.stocktwits.com). I had been trading & watching this stock all morning, and found it interesting to watch the tape while this was occurring.

I actually got shaken out of a short position right before this started and I suspect that the spike that took me out was part the manipulation.

[admin]

I recently picked up a book called "Nerds on Wallstreet" which covers this topic pretty in-depth. It's more broad and educational than technical though, but it does provide a kind of overview of the situation. It's good for providing personal research leads.