Alpha to Zeta – High Frequency Trading (HTF) Strategies

HTF Strategies:

  • The “Market Making” strategy that basically turns the bid-ask spreads into profits by generating daily buy and sell (limit) orders continuously and automatically.
  • The “Statistical Arbitrage” (favoured by Hedge Funds) whose aim is to take advantage of momentary pricing inefficiencies among various asset classes and securities.
  • The “Momentum Ignition” strategy (perhaps the trickiest one, and echoes the “spoofing” in the 2010 “Flash Crash”) which consists in executing and cancelling a large number of orders, aiming to ignite rapid market movements.
  • The “Liquidity Rebate Trading”: HFT firms started to gain popularity when exchanges began offering incentives for companies to add liquidity to the market. For instance, the Supplemental Liquidly Providers (SLPs) are a group of the New York Stock Exchange whose aim is to add competition and liquidity on the exchange. Said incentives consist of a fee or rebate paid by the NYSE to the firms for providing liquidity ($0.0015 per trade, as of 2009)

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