High Frequency Trading

Rackspace iMgctt
Mar 12 13 Comments

I know a lot of engineers work in HFT and it is quite lucrative. But doesn't it cause too much volatility? What kind of regulations are there? Curious to hear from engineers or analysts in the industry.


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TOP 13 Comments
  • Microsoft not-a-dev
    Yup the majority of transactions in the market are now driven by algorithms. It’s going to be a mess when things don’t work out anymore.
    Mar 124
    • NASDAQ / Engwundeebar
      The SEC has breakers in place to protect the markets should large swings occur in any given stock - limit up limit down halts, trade through protection, best execution regulation.

      That’s Not to say that a lot of firms out there don’t benefit from volatility in the markets...
      Mar 12
    • Microsoft not-a-dev
      Yes I agree with your comment below. Algorithms might not cause volatility (acrually maybe the opposite), but you can’t tell me they’re not influencing the market and the price.
      Mar 12
    • Microsoft not-a-dev
      I don’t know if the “quality” increases. We’ll see when the next crash comes.

      For now, we’ve had in the last year 2 “mini-crashes” that some blame on algorithms.
      Mar 12
  • NASDAQ / Engwundeebar
    What makes you say that it causes high volatility? The US equities market is one of the most regulated, liquid and efficient markets out there
    Mar 121
    • Google


      In fact, the effect is most often the opposite
      Mar 12
  • Bloomberg / OtherOFFSlayer
    Algos are there to take arbitrage and reduce inefficiencies. The opposite of volatility.
    It would happen otherwise in a slower manner if they didn't exist
    Mar 120
  • Bloomberg / Eng


    So what’s the problem with volatility?

    SEC got the market they asked for when they implemented Reg NMS. Everyone hated the Specialists @NYSE for collecting their 1/16th of a point, and the Market Making forms on the NASD for their “manipulation” of markets. SEC made it so all markets had to respect other markets quotes.

    Nobody could make a profit market making after decimalization.

    So exchanges by offering rebates to firms who posted order flow. Firms figured if you could post a buy and a sell on two different exchanges you could make rebates on both...... if you got their first. Hello low latency arms race!

    HFT’s do God’s work of providing liquidity for investors who want to actual move inventory. Not their fault that the SEC mandated such a shitty market structure.
    Mar 120
  • Charles Schwab EGjV76
    Algorithmic trading tends to reward particular strategies in such a way that they become self-reinforcing at scale. At some point seemingly everyone is following the same strategy. The insanity can continue for a surprisingly long time but it almost always breaks at some point and everyone following the popular strategy is punished. Rinse and repeat...
    Mar 121
    • Charles Schwab / Productmilkdud
      Kinda sorta like XIV in Feb18.
      Mar 12
  • Two Sigma simthis
    There’s a bit more to quant finance than just HFT. Don’t think volatility too much of a concern.
    Mar 120
  • Bloomberg / EngTREQSlayer
    Yeah I think hft decreases volatility. Definitely increases volume. Have you read "Flash Boys"?
    Mar 120

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