cover

In the Jan 2012 issue of “Traders” magazine , I found these points worth noting down :

  • In 2011, Knight Capital earned $172M from market making operations out of its entire on $517M

  • According to a Buy Side survey, the top 5 providers of algo trading systems are Credit Suisse, Goldman, ITG, Bank of America and Merrill Lynch and UBS

  • Aquaequities is a firm that focuses on proving block liquidity by aggregating from various mid tier specialized brokers. Very niche solution provider and making money.

  • Market Makers are watching the developments on Volcker rule with utmost attention. It is like a “comet heading towards Earth”, says a hedge fund manager about Volcker rule fine print.

  • SEC is hiring non-lawyers to aid investigations in to the complex world of HFT and algo trading

  • Canadian market is witnessing new trading venues, new order types,  a dramatic change in the market microstructure

  • HFT has had little impact on options market. The dearth of HFT in options has largely been attributed to market structure barriers.

  • The only strategy you can run in high-frequency trading is market making,” says Peter van Kleef, chief executive officer of Lakeview Arbitrage. He added, “Because once you go beyond the in-the-money strike, spreads widen out. So you can’t just keep lifting the offer and hitting the bid. The spread will just eat you up.”

  • But for an HFT, the statistical work necessary to price an option has not been part of the tool kit. For the most part, these shops have focused on three things: speed, speed and more speed.Being the fastest meant being first. That may work in simple markets such as futures and equities, but does little good when trading options.

  • With the race to zero latency winding down, many high-frequency shops are looking for the next thing. There is a very high probability that options trading will be next.

  • Cover story on TCA where the firms are now offering suites that contain real time TCA. This is unlike the scenario in the last decade where simple metrics like VWAP , expected cost metrics was all that was there to TCA, besides the fact that it was always a hindsight analysis. TCA in the current environment is much more real time and  next generation TCA would suggest different strategies in the middle of the trade, based on the partial execution of the order.