Buyside perspective on high-frequency trading

What really put high-frequency trading on the map was a front-page New York Times article that discussed the market impact it was having. The Sergey Aleynikov near-scandal--recall he was the guy accused of stealing algorithmic code from Goldman Sachs--also stoked the controversy, as did the flash order controversy.

We can thank Advanced Trading for adding some nuance to the publicity, with a look at the practice from the buyside. Basically, the buy-side tends to see it as almost synonymous with algo trading.

Eric Karpman, CEO of Trading Strategy Group and Luxoft Trading Solutions, tells the magazine, "It means analyzing what is happening in the market on the spot, without the time to store the data in a database, doing automatic tick by tick analysis and making decisions based on that."

At his shop, most high-frequency trading is executed around arbitrage situations. So really there are two areas of innovations: The analytic engine and the execution engine. I see HFT as enabling profits from ever smaller per-share profits. Spreads are no doubt lower, so you need volume to make any real money. So if you do it via software, co-location or some combination, you need to trade lots of shares to make those algos work. 

For more:
- here's the article

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