High Frequency Trading Algorithms Vastly Increasing



This GIF shows the rise of high frequency trading by computer algorithm from January 2007-January 2012. As can clearly be seen, the volume has increased substantially, especially in the past year. The more interesting component is that of high frequency quoting. Every time the bandwidth to handle high frequency quotes is increased, the volume of quotes increases immediately, but the volume of actual trades has not increased substantially in comparison (see article). In other words, current electronic trading systems run at full capacity nearly all the time, leaving little room for error and costing a great deal in infrastructure.  Considering the catastrophic and instantaneous possibilities that can arise from computer software, much attention should be paid to high frequency trading in the coming years.

–From Nanex.net and The Atlantic



One Response to “High Frequency Trading Algorithms Vastly Increasing”

  1. David Says:

    Hey, I love the GIF but I’d have to disagree with the conclusion that systems crashes are the fault of the algos. The notion that the weak hands must be protected against hiccups goes back beyond the bear raids of the 1800’s. The notion that the liquidity providers are exercising undue influence on the market and thus manipulating the price at which they deal goes back much further. I think the real question is why do we allow order input and cancellations at the microsecond level? If the answer is: because it increases liquidity, then it seems like the case is closed. No?

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