One market consultancy is giving the equity markets a peek into the inner machinations and thinking of high-frequency traders.
Rosenblatt Securities, responding in part to requests from clients, government grandstanding and others, said the firm though it would be worthwhile to survey its contacts in the automated proprietary trading world for information on the nature of their operations.
Rosenblatt Securities surveyed 39 firms globally, and received responses from 30 individuals at 19 firms. The biggest single respondent cohort was C-level executives at HFT firms. In addition to general and demographic information about these firms, our questions focused specifically on their behavior in the U.S. cash equities market.
Several of the survey’s key findings conflict with popular perceptions of HFT. Rosenblatt sahred some of the key highlights:
* Most HFT firms were founded before Reg NMS
* The vast majority of HFT firms are US-registered broker/dealers
* Most don’t operate dark pools or other off-exchange platforms
* Despite the hype, most HFT firms are not yet trading OTC swaps
* Average holding periods in US equities are surprisingly long
* Many HFT firms trade thousands of US equity securities, not just the top 100-200
* A significant minority of HFT firms mostly removes liquidity from US equity order books
* Order cancellation rates in US equities are lower than many believe
* Most HFT activity in US equities occurs on registered exchanges
* HFTs’ on-exchange trading in US equities is concentrated on “maker-taker” venues
* Per-share profits are tiny, and may be lower than we previously estimated
* Most HFT firms lose money on at least 40% of their US equity trades
The full report can be requested from Rosenblatt Securities.