• "Supercomputers pitted against one another in a high-stakes battle of attack and counterattack over a global network where predatory algorithms trawl the information stream, competing every millisecond to gain an informational advantage over rivals. It sounds like Hollywood fiction, but it's just an average trading day on the stock market…. Because high-frequency trading is, as Richard Bookstaber has recently described it, an "arms race" where relative speed matters much more than absolute speed, this market is one of the few left with a demand for raw performance at any cost. Indeed, my personal introduction to the world of HFT came in bits and pieces over the past few years via parts of briefings from the Intel, NVIDIA, AMD and their would-be competitors, all of whom have been aggressively pursuing this market." But "the hardware that HFT platforms are using… is essentially the same as the technology that PC gamers are using to play their own games with much lower stakes."
  • "In recent years, growth of alternative electronic trading venues has been driven by a multitude of factors: the introduction of decimalization; the adoption of FIX as the main protocol for electronic communication; the availability of technology for developing market infrastructure conducive for electronic trading; the rapid adoption of electronic trading; the adoption of algorithmic trading; and the availability of co-location services."
  • "High frequency trading strategies generate returns through the rapid turnover of many small positions in one or more financial instruments. These positions may be concentrated in a single instrument or spread across multiple instruments. In their basic form, strategies take advantage of market inefficiencies, sending waves of small marketable orders to trade into or out of positions on detecting minute changes in markets, instruments, or information. By locking in small profits across a very large number of trades, these strategies generate substantial returns for their backers. Many types of high frequency strategies exist. Some of the more basic categories include index arbitrage, event arbitrage, and information arbitrage."
  • "High-frequency traders have… faster execution speeds thanks to a growing trend known as co-location. With co-location, firms get to rent server space right next to the servers that process trades for the exchanges themselves. And it’s becoming big business for the exchanges, which are hungry for more revenues in this era of increased competition. The New York Stock Exchange is currently in the process of building two cutting-edge trading hubs — one in suburban New Jersey and another just outside of London – at a price tag of $500 million."
  • "In this interview with Traders Magazine Senior Writer James Ramage, Byrne talks about high-frequency trading–as well as the quality of liquidity it brings to the marketplace–co-location, the predictability and visibility in latency management and unequal latencies at market venues."
  • Wall Street firms "are turning to electronic trading, in part because a 1-millisecond advantage in trading applications can be worth millions of dollars a year to a major brokerage firm. That is why colocation — in which firms move the systems running their algorithms as close to the exchanges as possible — is so popular."
  • (tags: academia econ)