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Commentary

John Turney
Traders Magazine Online News

Foreign Exchange Infrastructure: Yesterday, Today and Tomorrow

In this exclusive to Traders Magazine, John Turney, Global Head of Outsourced FX at Northern Trust, discusses the evolution of the fx infrastructure and what is to come.

Traders Poll

What is your favorite movie about trading?

Wall Street

23%

The Big Short

13%

Margin Call

6%

Equity

0%

Trading Places

38%

The Wolf of Wall Street

8%

Boiler Room

7%

Arbitrage

0%

Too Big to Fail

5%

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GOING WITH THE FLOW: Some HFT strategies can cause your algorithm to follow the wrong flow

High Frequency Trading (HFT) may make markets more efficient by repricing certain derivatives to reflect the stock market, or making markets in illiquid stock. However other HFT strategies are more aggressive. One HFT strategy is called directional, and according the SEC can cause problems if used improperly. Watch this video and learn more.

To protect clients for directional HFT strategies Bloomberg Tradebook employs  smart logic that doesn't chase prices while seeking to get maximum fill rates at desirable prices. For more information visit www.bloombergtradebook.com

Q&A

Q: Some of the ways you discussed that buyside traders can protect themselves, like randomizing behavior, are those new strategies?

A: They're new in the sense that now you'd use algorythmic programs to better utilize that strategy; however, traders since the dawn of the markets have taken pains to disguise or hide what they're doing in order to keep other traders from "front running" their order and making their trades less profitable.

Q: What are the ways that brokers can protect their clients from HFT tactics?

A: Brokers need to employ advanced techniques in their smart order routing/posting logic to help clients avoid the adverse effects of HFT tactics. Tradebook, for example, does not immediately go back to a venue that provided a fill. We believe natural liquidity always comes back, this allows us seek more liquidity at the same price level instead of chasing a market that could be driven by HFT quotes.

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About Insight Bites in 60 Seconds

When it comes to stock trading, so much is changing so quickly that it’s difficult to understand and manage all the variables. Whether it’s algorithmic trading, price swings or dark liquidity, The Insight Bites series presents smart and concise snapshots of what a trader can do to address and overcome the most pressing of these challenges. Hosted by Traders Magazine and brought to you by Bloomberg Tradebook, each 60 second animated video provides quick and humorous insight into a unique issue that traders face every day. For more information, visit www.bloombergtradebook.com.