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High-Speed Firms Now Oversee Almost All Stocks At NYSE Floor (bloomberg.com)

Posted by Soulskill on from the robot-economy dept.

An anonymous reader writes: Barclays, one of the biggest banking and financial services firms in the world, has sold its business on the floor of the New York Stock Exchange to Global Trading Systems. This is significant because it marks a transition between human-based trading and high-speed trading. Now, humans on the NYSE floor have more of a supervisory role, making sure the automated systems don't go haywire. Barclays has been around for hundreds of years; GTS was founded in 2006. "There used to be dozens of specialist firms, as designated market makers were once known, at the NYSE floor. But profits from trading U.S. stocks dwindled, making it difficult to serve as market makers without automation. Although GTS, Virtu, IMC and KCG employ human traders at the floor, their businesses are driven by some of the industry's most sophisticated computer systems."

2 of 138 comments (clear)

  1. Re: The "Floor" was always a kludge by clovis · · Score: 3, Informative

    The faster the trading, the worse the swings will get.

    The SEC's investigation into the 2010 Flash Crash, came to the exact opposite conclusion: that HFTs have a stabilizing influence on markets by providing liquidity. One of the reasons for the crash was that when prices moved outside of the expected range, many HFTers stopped trading, and the resulting drop in liquidity, and rise in spreads, caused some investors to panic.

    I'm not seeing the statement that " HFTs have a stabilizing influence on markets by providing liquidity" in the SEC report for the big flash crash of 2010, nor statements to that effect. https://www.sec.gov/news/studi...
    It's full of statements like this:

    In general, however, it appears that the 17 HFT firms traded with the price trend on May 6 and, on both an absolute and net basis,
    removed significant buy liquidity from the public quoting markets during the downturn.

    However, for those who don't want to read the report, in no way is the SEC suggesting "the crash was caused by HFT traders".

    Here is a recent SEC paper on HFT trading:
    https://www.sec.gov/marketstru...
    Regarding the benefits of HFT on the market, the research they analyzed suggests good benefits (increase liquidity and reduce volatility), but it depends.
    The benefits of passive HFT strategies seem to be quite positive and HFT's may be taking the place of market makers.
    Aggressive HFT strategies provide liquidity in stable markets, but has worsened volatility when the market experiences abberations

  2. Re: The "Floor" was always a kludge by Anonymous Coward · · Score: 2, Informative

    Huh? New Zealand's stockmarket has been purely electronic electronic LONG before the NYSE did. (We closed our stock exchange 'floor' with people actually in a physical room back in 1991. From then onwards, all transactions were done completely electronically by brokerages, at the brokerages). HFT is not necessary for getting rid of inefficient brokerages, merely a market committed to being sensible and doing electronic brokering.

    That's right, 1991. NYSE went to a hybrid market in 2007 as best as I can tell.

    Besides, "As recently as May 2014, a CFTC report concluded that high-frequency traders "did not cause the Flash Crash, but contributed to it by demanding immediacy ahead of other market participants" Wikipedia. HFT made the flash crash worse. You're saying the SEC said HFT was okay, but honestly, look at that criticism of that report in the very article you linked to,

    Hysteresis isn't lag. Lag means there's a delay -- but it could be a fixed delay. HFT isn't about faster transactions -- it's about MORE transactions made by more agents and decision makers - and it's chaos theory territory because each other HFT agent will behave according to its own algorithms that are liable to change as and how they want -- and the HFT traders are not doing this because they want to 'stabilise the market', they're doing it to MAKE MONEY.

    Ask any pilot if they want every control surface behaving independently according to whatever algorithm each control surface wants to do, without the pilot knowing when or where each control surface will change its behaviour, without caring about the rest of the plane; or if they want every control surface behaving predictably and how they expect it to behave.