Forex industry clamps down on high speed traders | Forex Factory

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Forex industry clamps down on high speed traders

  • #1
  • First Post: Jul 1, 2011 11:57am Jul 1, 2011 11:57am
http://www.forexstreet.net/profiles/...forex-industry
  • #2
  • Jul 1, 2011 12:21pm Jul 1, 2011 12:21pm
I thought high frequency trading could only take place on a centralized exchange? (bypassing regular order execution)... I guess they can still disrupt the order book and manipulate the DOM?
  • #3
  • Jul 1, 2011 4:12pm Jul 1, 2011 4:12pm
Ridiculous!! This is total destruction of market efficiency. If you clamp down "high frequency" trading, who's gonna provide the orderflow? Where is the market liquidity going to come from? The bid/ask spread on pairs like E/U is going to be 10 pips again let alone price gaps everywhere!! Finally we have a near-efficient market, and they have to come in and ruin it!

IF they really want to "clamp down" on "high frequency" trading, they would've done it long time ago. Honestly, those big brokerage houses do this lot more frequently and in lot larger volume than us small traders. The ONLY reason why they are doing this now is because they are just slightly beaten in their own game! Stupid greedy idiots!!
Make your losses in demo. Earn your profits live.
  • #4
  • Jul 1, 2011 5:08pm Jul 1, 2011 5:08pm
Quoting Forexia
Ridiculous!! This is total destruction of market efficiency. If you clamp down "high frequency" trading, who's gonna provide the orderflow? Where is the market liquidity going to come from? The bid/ask spread on pairs like E/U is going to be 10 pips again let alone price gaps everywhere!! Finally we have a near-efficient market, and they have to come in and ruin it!

IF they really want to "clamp down" on "high frequency" trading, they would've done it long time ago. Honestly, those big brokerage houses do this lot more frequently and in...
Where did markets get liquidity before HFT? lol.. plzz
  • #5
  • Jul 1, 2011 5:16pm Jul 1, 2011 5:16pm
Quoting Deusomega
Where did markets get liquidity before HFT? lol.. plzz
Why go back to bid/ask spread of 10 pip for E/U when you can enjoy a 0.5 pip now?
Make your losses in demo. Earn your profits live.
  • #6
  • Jul 1, 2011 5:41pm Jul 1, 2011 5:41pm
I'm just saying that there will be liquidity like there was before. And I'd love to know some small retail folks doing HFT. And is HFT the sole reason for the reduction in spreads? And as traders don't we profit from more market ineffeciency?
  • #7
  • Jul 1, 2011 7:01pm Jul 1, 2011 7:01pm
Quoting PoundTrader
http://www.forexstreet.net/profiles/...forex-industry
This is not going to do anything but help retail traders... well except any rich retail trader who has a robot that uses a scalping algorithm

This only applies to institution and big players who scalp with large moola

I only see bad news for anyone who is a scalper and has a ton of money...
  • #8
  • Jul 1, 2011 7:05pm Jul 1, 2011 7:05pm
Quoting PoundTrader
http://www.forexstreet.net/profiles/...forex-industry
Sorry for intruding and littering on your thread. And thanks for the heads up
  • #9
  • Jul 1, 2011 7:58pm Jul 1, 2011 7:58pm
Quoting momento
Sorry for intruding and littering on your thread. And thanks for the heads up
  • #10
  • Jul 1, 2011 8:27pm Jul 1, 2011 8:27pm
Guys, that article gets it all wrong.

Read the real news instead: http://uk.reuters.com/article/2011/0...75Q1TN20110627

It's about controlling the risk of HFT, not about forbidding it. The banks love HFT for the commissions they provide. And the banks who can't handle the heat don't enter into the kitchen.

To put it another way: your broker checks your account for margin call in (near) real-time. But most of the big guys, who do HFT, are only checked for margin call once a day. So if their algo goes insane, their liquidity provider could sustain large counterparty risk.

This initiative is all about adding real-time risk management for clients who do HFT, so that they can't get into negative balance.

Even if they wanted, they couldn't forbid HFT in a decentralized market like Forex - all trading would move to ECN's.
  • #11
  • Jul 2, 2011 5:05am Jul 2, 2011 5:05am
Quoting Adal
Guys, that article gets it all wrong.

Read the real news instead: http://uk.reuters.com/article/2011/0...75Q1TN20110627

It's about controlling the risk of HFT, not about forbidding it. The banks love HFT for the commissions they provide. And the banks who can't handle the heat don't enter into the kitchen.

To put it another way: your broker checks your account for margin call in (near) real-time. But most of the big guys, who do HFT, are only checked for margin call once a day. So if their algo goes insane,...
Okay, am sober now

Thanks
  • #12
  • Jul 3, 2011 4:47pm Jul 3, 2011 4:47pm
Quoting momento
Okay, am sober now

Thanks
  • #13
  • Jul 4, 2011 9:12am Jul 4, 2011 9:12am
Quoting Deusomega
I'm just saying that there will be liquidity like there was before. And I'd love to know some small retail folks doing HFT. And is HFT the sole reason for the reduction in spreads? And as traders don't we profit from more market ineffeciency?
This is the definition and description of HFT on Wikipedia:

High-frequency trading is the execution of computerized trading strategies characterized by brief position-holding periods, in many cases taking advantage from microstructure inefficiencies[1]. In high-frequency trading, programs analyze market data to capture trading opportunities that may open up for only a fraction of a second to several hours[2]. High-frequency trading, (HFT), uses computer programs and sometimes specialised hardware [3] to hold short-term positions in equities, options, futures, ETFs, currencies, and other financial instruments that possess electronic trading capability.[4] High-frequency traders compete on a basis of speed with other high frequency traders, not long-term investors (who typically look for opportunities over a period of weeks, months, or years), and compete with each other for very small, consistent profits.

From this definition and description above, sounds like we retail investors are included as engaging in HFT as well. And according to this news article, we will be targetted too and that's why I believe it's very unfair. I stand to be corrected.

Second, regarding market inefficiencies, they are NEVER good for any market and market inefficiencies do not benefit anybody as it impedes the running of the market and creates unnecessary costs for all. And for that, HFT's are actually doing everybody a favour by ironing out those market inefficiencies so that all parties are trading facing the same information. The market inefficiency that you are talking about is the "Informational market inefficiency" which states stipulates that given all known information in the market, there is no consistent excess returns or profits to be made, that is one theory that would not benefit us small retail investors or any investors much.

Sorry for the long post. But hope this helps.
Make your losses in demo. Earn your profits live.
  • #14
  • Jul 4, 2011 10:39am Jul 4, 2011 10:39am
isn't scalping consider HIGH-FREQUENCY TRADING?
  • #15
  • Jul 4, 2011 11:54am Jul 4, 2011 11:54am
Quoting PoundTrader
isn't scalping consider HIGH-FREQUENCY TRADING?
what broker do you use.. again, these articles make it clear this only affect institutions and maybe 1% of retail traders

basically if you have under $50,000 in your account then I can say with 100% certainty you are not in that 1% of retail traders this affects.....
  • #16
  • Jul 4, 2011 11:59am Jul 4, 2011 11:59am
I think the main reason for this type of action is to protect against similar outcomes that computer can cause chaos

although may 6 2010 was not really the fault of high speed trading and more to do with other aspects of computer.. the point being.. a big institution having a computer trade can lead to unintended consequences


Inserted Video
  • #17
  • Jul 4, 2011 6:03pm Jul 4, 2011 6:03pm
Quoting newyear498
http://www.youtube.com/watch?v=AFlmSp4sIog
LMAO......
  • #18
  • Jul 4, 2011 6:16pm Jul 4, 2011 6:16pm
Quoting tradestar1
LMAO......
its funny because I watched "floored" and they were complaining about how computer ruined everything.. they must have all been saying that day "SEE SEE SEE!!!! WHAT DID I FUCKING SAY!!!"
  • #19
  • Jul 4, 2011 6:30pm Jul 4, 2011 6:30pm
Quoting newyear498
I think the main reason for this type of action is to protect against similar outcomes that computer can cause chaos

although may 6 2010 was not really the fault of high speed trading and more to do with other aspects of computer.. the point being.. a big institution having a computer trade can lead to unintended consequences


http://www.youtube.com/watch?v=AFlmSp4sIog
Please find video link disputing SEC findings about "Flash crash 2010":http://beta.uitzendinggemist.nl/afleveringen/1059643

All interviews are in plain English so never mind the Dutch parts.

Cheers
  • #20
  • Jul 5, 2011 6:28am Jul 5, 2011 6:28am
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