As a former Pit trader in bond 30 landing at CBOT since 1984-2004, I would like to offer my perspective on high frequency Trading (HFT). Maybe this will help in trying to understand what is happening in B2B e-markets.
E-commerce killed commercial pits and I've lost my job, I learned that I was. type gained horse buggies and 1923, so I was too academic, quickly.
I moved into teaching traders and trading in the electronic world. Then HFTs came.Wham! my business started slowly die. Dealers hover and click get picked their pockets from the HFTs.
I have both inside and outside of many commercial enterprises in the last 5 months for interviews during my search for a job. During such visits I have had lots of interesting discussions with merchants businesses.Their struggle as dealers hover and click. In addition, you are already in contact with many merchants that I used to teach as they try to stay with their jobs as dealers hover and click; for example, I recently had lunch at the Chicago Board of trade (now the CME) with someone who is a trader point-and-click.He said he's slowly makes less and less money. in addition, many of the co-traders is too.
Ultimately from conversations with dealers and articles I've read on high frequency Trading, you slowly I realized what the HFT systems. These are the market leaders from the trading pits.
Maybe you already noticed was The HFTs market makers? use this as a ' defence ' of the criticism that you received in the press. Simply do not believe them at first.Now do. These are market makers. Hang in there with me for a second and read on.
The trading pit there were two types of traders, the broker who completed orders for Commission (me) and the market maker who took on the other side of the order. The labour broker is no longer necessary because his work can be done by an accountants who sit at a desk, inside a commercial enterprise. Registrars don't have a membership on the stock exchange.
Since the markets went online, volume exploded because someone could trade. Then things began to change as the largest ship brokerage houses invested in bigger, better and faster computers. Dozens of quants were leased to write her work and what did his entered into computer code. OK, fine. the big boys always has an advantage. However, then got nasty.
Larger businesses have begun to "co-locating ' computers with network computer companies. They worked directly with networking exchanges, so could bring faster runtimes for big customer plus that will become more desirable to Trade on the Exchange.Soon, the largest commercial enterprises have begun to view exchanges as a middle man. Perhaps they thought, should initiate their own exchanges? . Immediate edge is one of the exchanges.(E) and? Well, these larger companies captured by examining orders before they hit the market Literally looked turn then had the capacity to act or act on such information. When I was in the trading pits which was illegal.Called front running, and for some reason if the front running is only 4-milliseconds not count? come on! Four milliseconds is a long time in the world computer!
I was a broker in the pit. If I showed a market maker my order before you run this, I would have lost customers, lost my participation, and have been out of business. Legal proceedings are initiated against me.
There are two fieldsets playing here. Two sets of rules. one for the big boys and one for young boys.
The point is HFTs wouldn't hurt if the playing field was the same for all the parties involved. HFTs are not bad, if they act as market makers on the NYSE, and follow the rules.These national rules are expected to maintain the orderly markets from MAKING MARKET a.
You are not allowed to fade the machines and learn back and do nothing if they claim they are.The result is a "flash-crash".Do not make a market is also against the rules Exchange NYSE.
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Restrict it for a minute, an Exchange before the shop, there was a private club called the Chicago Board of trade.From 1848-2003 this Exchange was dominant.If you wanted to trade you a set of rules and protocols.If you've had infringed deal expeditiously.Some get away with stealing, like any other business. However, the overall slide worked. Now, the markets are open to the world; I was an advocate of open markets. I champion e-marketplaces.Continues to do so.
However, you need to change things and I think the discussions and ongoing articles on this subject will provide assistance in changing the game.We are in an era where large companies are under a lot of strain and that will continue the small guy is fighting back and he can win. but we must keep fighting.
Should be made to follow a HFTs recently written RuleSet. companies connect retailers exchanges must be made to publish what they pay and how quickly the connections are for these rates. The speed of the connection must be published in real time; in other words, must be transparent, as was the pits. They also must make it inaccessible for smaller businesses to connect with the same speed for the same price as the big boys.
Hope this helps,
James Goulding
10/29/2010
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