The Idiots Guide to High Frequency Trading

For those that may not have the time to pick up Michael Lewis’ new book entitled “Flash Boys: A Wall Street Revolt” here is a fairly good high level introduction to high frequency trading by Mark Cuban. I also suggest reading Michael Lewis’ article in the NY Times entitled “The Wolf Hunters of Wall Street” http://nyti.ms/1iRYw3Y. It is a major issue that regulators have to tackle to restore confidence in the financial markets.

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First, let me say what you read here is going to be wrong in several ways.  HFT covers such a wide path of trading that different parties participate or are impacted in different ways. I wanted to put this out there as a starting point . Hopefully the comments will help further educate us all

1.  Electronic trading is part of HFT, but not all electronic trading is high frequency trading.

Trading equities and other financial instruments has been around for a long time.  it is Electronic Trading that has lead to far smaller spreads and lower actual trading costs from your broker.  Very often HFT companies take credit for reducing spreads. They did not. Electronic trading did.

We all trade electronically now. It’s no big deal

2. Speed is not a problem

People like to look at the speed of trading as the problem. It is not. We have…

View original post 2,422 more words

About Ludovic Dumas

Ludovic transforms innovative companies into world-class organizations. He is an investment professional at an investment firm representing the interests of one of the most successful families in Canadian business. Before joining the private equity world, Ludovic was an investment banker at CIBC and with ING Group’s investment banking team in Frankfurt, Germany. Mr. Dumas was also a management consultant with Deloitte where he worked on corporate strategy, restructuring, market analysis, due diligence, and economic development mandates. Specialties Mergers & acquisitions, capital raise, corporate strategy, entrepreneurship.
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