It was big news when regulators decided the foreign exchange market should be exempt from the same kind of rules that are being contemplated for the cash equities market. That just might give the booming foreign exchange market yet another boost.

We're now seeing a lot of high-frequency techniques proliferate in the forex market. According to the Aite Group, high-frequency trading accounted for roughly 30 percent of all foreign-exchange flows, as of 2010, compared with 13 percent in 2004. The market still has a ways to go to catch up to the equities market, in which about two-thirds of all trading is accounted for by high-frequency techniques.

But a three-way race to build faster systems is underway, pitting "Wall Street giants such as Deutsche Bank AG, the biggest currency-trading venues like brokerage ICAP PLC's EBS, and smaller market participants like Chicago's Allston Trading LLC; Currenex, owned by State Street Corp.; and Timber Hill, a unit of Interactive Brokers Group" against one another, the Wall Street Journal reports.

Hedge funds are the prime movers, as they are hungry for high-frequency options. At the same time, traditional dealers are seeing spreads narrow, not unlike the way they did in the equities market and the options market.

As more asset classes fall under the high-frequency rubric, we may see more attempts to link these markets in algorithms. We certainly see that in stocks and futures, for example. Some people may be working on a grand algo that encompasses everything. That would certainly be a market differentiator.

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