High-Frequency Trading Jumps the Shark
The first rule in journalism is "follow the money." This is why, when I read this morning that a dozen traders had left Goldman Sachs’ government and derivatives desk over the past months, it felt like the final nail in the coffin for investment banking as we know it.
With new regulations taking hold—such as Dodd–Frank in the US, and the review of the Markets in Financial Instruments Directive (Mifid II) and Basel III in Europe—it seems there will be more liquidity in the Gobi Desert than in the markets.
Wall Street firms have adopted a bunker mentality, storing up as much cash on their books as possible to meet coming demands. To handle it, they are cutting unprofitable businesses and reducing headcount, as they did in 2008.
With new risk management rules taking effect, and the race to reduce message latency becoming absurdly expensive, are we witnessing the apex of high-frequency trading? For market access providers, which most broker-dealers are for the high-frequency trading clients, the cost versus the return is getting harder to justify than it was just a few years ago.
There always be firms serving the niche market, but larger firms just may look to invest their infrastructure dollars elsewhere, in places like the foreign exchange (FX) and over-the-counter (OTC) markets.
In the meantime, we're back to the belt-tightening times we saw just a couple of years ago.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
Industry associations say ECB cloud guidelines clash with EU’s Dora
Responses from industry participants on the European Central Bank’s guidelines are expected in the coming weeks.
Regulators recommend Figi over Cusip, Isin for reporting in FDTA proposal
Another contentious battle in the world of identifiers pits the Figi against Cusip and the Isin, with regulators including the Fed, the SEC, and the CFTC so far backing the Figi.
US Supreme Court clips SEC’s wings with recent rulings
The Supreme Court made a host of decisions at the start of July that spell trouble for regulators—including the SEC.
This Week: FCA, Plato/Turquoise, Franklin Templeton, and more
A summary of the latest financial technology news.
Insurers deny cyber premiums are rising
Contrary to banks’ complaints, underwriters and brokers claim current market for policies is soft.
Size matters: US equity market players wrangle over new tick size regime
The industry expects the SEC to finalize the Reg NMS shake-up as soon as late summer. While there is broad agreement about the need for change, the extent of the reduction in access fees and tick sizes will have a big impact on markets.
CME: CFTC OKs clearing move to Google Cloud
The CFTC has given the Chicago-based exchange approval to run its clearing and settlement infrastructure on the Google Cloud Platform, while the exchange and vendor have extended their partnership to last until at least 2037.
Cutting through the hype surrounding the FDTA rulemaking process
A bill requiring US regulators and institutions to adopt a machine-readable data framework for reporting purposes applies to entity identifiers, but not security identifiers, in a crucial difference, writes Scott Preiss, SVP and global head of Cusip Global Services.