High-frequency trading hitting a plateau?

High-frequency trading was a huge issue last year, sparking a lot of regulatory and market angst. The growth curve was very steep, mimicking the steep hike in the VIX, making some think that HFT was taking over the markets. But it looks now like high-frequency traders have hit a plateau, in the wake of the drop in volatility.

At least one exchange executive tells Traders that the market is now saturated. Firms classified as high-frequency are conventionally defined as those executing at least 1,000 trades per second. There may be about 400 such firms. At one point, this sort of trading accounted for up to perhaps 70 percent of trades. The bottom line is that high-frequency trading is no guarantee of survival. The reason for its popularity is that efficiencies have forced spreads to razor thin levels, which means the way to make money is in bulk.

But as volatility declines, those opportunities present themselves less and less frequently. And there is ample opportunity to lose money doing this. We may see fewer start-ups as a result. 

For more:
- here's the Traders article

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