June 8, 2012

Sell Software to HFT vs Sell Ice to Eskimos

Sell software to HFT vs sell ice to Eskimos.
Which do you think will have a better chance of success?

HFT algo firms live and die by their software and hardware. Would they go outside to buy the most critical pieces of their trading software? 

Nonetheless, Guardian has an interesting piece about a software salesman trying to sell software to HFT firms. 
By now 84% of all stock trades on the New York Exchange are by HFT computers. This leaves 16% for human traders. Automated trading is the future, and my company sells software to hedge funds and investment banks that helps them improve their algorithms – the programme used by their HFT computers. Specifically it helps them respond to events ahead of the rest of the market.

Usually the market reacts to events with a time lag of seconds, up to several minutes; if you know where the market is heading before it actually does, that's very lucrative. Not only in equity (shares) but also foreign exchange (FX), bonds ("fixed income") and commodities.

If the market knows that other algos can react in milliseconds, would the market be content to react in seconds?

This particular software is analyzing social media – Google, Facebook, Twitter – to find events that can affect the market. Therefore the claim “we robotise events”

Admirable goals.

Tags: HFT algo software, HFT firm buying software, HFT algo goals, HFT trading social media