Tight rules at home push HFT beyond borders
As regulators in the United States and Western Europe mull what to do about high frequency trading, other markets are welcoming HFT with open arms.
In a comprehensive review of how developing markets are welcoming HFT, we are seeing the fruits of electronic trading in the global marketplace. While regulators and lawmakers are looking at HFT and its risks -- Anyone forget about the Flash Crash of 2010? -- other nations are eager to welcome any speedy expats who want to trade as fast as possible. Of course, these nations may not have the IT infrastructure we take for granted in the U.S. but these markets know a golden opportunity when they see one.
According to this wide-ranging article, HFT is being used as a lure to attract new investors. HFT firm Getco has opened an office in India, which boasts the fastest growing market for derivatives. Brazil and Russia are going full speed ahead on HFT while China is being cautious and India might be uncertain when it comes to HFT. Hong Kong is pumping tons of IT dollars into its trading infrastructure while keeping a close eye on HFT and tight regulations.
This is hardly surprising, note industry observers. "There are two things going on here: HFTs are being pushed out of the more established markets, North America and Europe in particular, and being pulled into emerging markets. It's not just one or the other," Dr. Richard Bentley, industry vice president, banking and capital markets at Progress Software, says in the write-up.
But it still has yet to be proven that JFT traders and hedge fund operators would want to dial back their trading speeds to those they enjoyed a decade ago. Once HFT firms have become used to trading at record speeds, the idea that they would willingly slow down is ludicrous. What technology or modern convenience has gotten slower? I can only think of one area and that's air travel: The Concorde was the only popular and widely used supersonic transport but since its final flight last decade, people no longer travel faster than the speed of sound.
The idea of traders slowing down or paying fines for trading at sub-second rates might be the right reason for some American traders to go overseas. If they crash and burn they can always come home.
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