A question asked by Credit Suisse’s Ana Avramovic and another judgement call on high frequency trading’s most often cited benefit — namely, do HFT’s actually provide a benefit in the form of liquidity/market making? Or is all the volume they create just noise, signifying nothing of real use.
From Avramovic, relying on a counterfactual argument and with our emphasis: Read more
One doesn’t need Michael Lewis to point out that the world of order flow (and asset transfer) is murky. Purposefully so.
Getting data on the sector, somewhat unsurprisingly, is not that easy. One of the few companies that does assess the market and shares those findings with journalists is Rosenblatt Securities (albeit, with conditionality). But even this, to some extent, is only an estimate because not all market participants share their data with Rosenblatt. In Europe, meanwhile, there is also the problem of double counting amidst the consolidated OTC figures, which means the figures against which dark pool activity is compared against can be unfairly drowned out. Read more
High-speed traders may no longer be able to count on Warren Buffett’s Business Wire for direct feeds to market-moving information. But that doesn’t mean the problem of trades taking place with after-market press releases but before the US market is officially closed has been solved.
Take the case of Acacia Research Corp, which trades as ACTG. According to Nanex, the market data company, a batch of suspicious trades began to take place 127 milliseconds after 4pm on Thursday. Those trades are highlighted in yellow here. Click to enlarge. Read more
Nanex, the market analysts who like to create visual representations of the markets, have animated half a second of trading activity in Johnson & Johnson stock. The results are quite intoxicating to watch:
Not since Andy Haldane noted that an impatient market was not a happy market, has the BoE looked at the issue of high frequency trading and its effects on market quality – and particularly price discovery – in such depth.
From the abstract of the Bank’s latest working paper, by Evangelos Benos and Satchit Sagade, on Monday (our emphasis): Read more