High-frequency trading has gotten a lot of attention lately. We've noted that these new-age brokerages and trading outfits now account for 60 percent of all trading volume. While most broker-dealers have taken some hits as of late, these firms have become monsters--huge, powerful sources of liquidity, driven mainly by quantitative strategies. Their goal is huge transaction volume, the best bet to make money in a low-spread era.

Waters offers an interesting look at some of the dynamics driving this segment of the industry. PhaseCapital, a quantitative firm that trades the S&P 500, relies on high-frequency powerhouse Lime Brokerage as its broker for its low latency feeds. One question: Does this pose any threat to the established order? The CEO of PhaseCapital: "Our prime broker is Goldman Sachs and they offer us a lot of good services but in terms of really low latency, disaggregated market data feeds, and an ability to trade in those disaggregated destinations at low cost and with low latency, Lime has a pretty unique offering for the brokerage space." We've said it before, low-latency is a competitive advantage. You cannot get low enough.   

For more:
- here's the Waters article

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