Quant approach advocates faces a hurdle

We've noted before that winning the trading game on Wall Street depends on your ability to win the technology arms race. You've got to develop faster, more powerful methods constantly, or risk being left behind. The fight over flash orders and sponsored access--two big controversies right now--underscore this need.

Certainly, market center Direct Edge found a winning method when it launched its Enhanced Liquidity Provider program--the unquestioned leader in the flash order arena, the one that sparked Nasdaq and BATS to follow suit. And it can argue with evidence that such programs indeed enhance liquidity for its customers. 

From the customer point of view, these sorts of services may be increasingly attractive. Bloomberg notes that more than 75 percent of hedge funds, pensions and mutual-fund companies use computer-driven strategies because they reduce costs. You need every advantage. We'll see how the big broker dealers respond. For now, Goldman Sachs doesn't rely on flash orders but it is developing sponsored access services. It will be watching regulatory developments carefully.   

For more:
- here's a Bloomberg article

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