Commentary

Robert Schuessler
Traders Magazine Online News

A Smarter Monkey

In this contributed piece, TIM noted that some traders do better than others when using data that has been run through certain analysis - that is, have used some form of machine learning to assist them.

Traders Poll

In his first public speech, SEC Chair Jay Clayton deviated from his prepared remarks and offered his own "off the cuff" comments on market issues. Do you like this change of pace?




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November 1, 2013

Braking HFT

By

Peter Chapman

Should one group of traders have a speed advantage over another? Many in the industry say 'no' as they blame high-frequency traders for the market's ills. At least one academic agrees and has a plan to put the brakes on.

Eric Budish, an associate professor of economics at the University of Chicago, told attendees at a recent industry conference that high-frequency trading drives up costs for investors by harming market makers. He believes a wholesale makeover of the market's structure from continuous trading to a series of call auctions would give bona fide liquidity providers time to react to the predatory behavior of high-frequency traders.

"A news event can lead to a race amongst high-frequency traders to pick off liquidity providers' stale quotes," he said at Baruch College's annual Financial Markets Conference. "That race manifests itself in an increased cost of liquidity provision. I think we have the wrong market rules in place. My research suggests we should move from a continuous-time market to one of discrete time. Perhaps once per second or once per 100 milliseconds."

 

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