STORM OF INSIGHTS – High Frequency Trading: Too Fast To Fail? (Part 2)

cropped-screen-shot-2015-09-06-at-18-02-14.pngHere is a link to my latest contribution to The Market Mogul, with a series of articles that tackled the High Frequency Trading universe.

Part 1, going from its early history, up to the most recent controversies, including the 2010 “Flash Crash”, a straightforward opinion about the allegedly guilty trader and a quick review of Michael Lewis’ Flash Boys.

Here is an extract:

In 1987, we stumble upon the very interesting case of Thomas Peterffy. The latter was an options trader with a background in software engineering, who one day decided to switch a cable from his Nasdaq terminal back to his computer, which resulted in a fully automated algorithmic trading system, able to receive quotes and execute trades without the need of human intervention. The story tells that a Nasdaq official that dropped by his office was astonished to see a mere Nasdaq terminal and a computer, instead of a whole team of traders.

Part 2 explores the HFT universe in greater details, while once again focusing on the Good, Bad, and Ugly sides.

Here is an extract:

Obviously, we can suppose that, just like laws regarding Taxation, people will find ways to conveniently circumvent them. In fact, Thomas Peterffy’s experience, who is now billionaire, is instructive: after visiting his office and consulting the rulebook, the Nasdaq official affirmed that the rules required trades to be entered via a keyboard. Of course Peterffy found a way to get the authorization to trade again … His team responded by building a robot typist.

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