High-Frequency Trading - HFT

A program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. High-frequency trading uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds will be more profitable than traders with slower execution speeds. As of 2009, it is estimated more than 50% of exchange volume comes from high-frequency trading orders.

High-frequency trading became most popular when exchanges began to offer incentives for companies to add liquidity to the market. For instance, the New York Stock Exchange has a group of liquidity providers called supplemental liquidly providers (SLPs), which attempt to add competition and liquidity for existing quotes on the exchange. As an incentive to the firm, the NYSE pays a fee or rebate for providing said liquidity. As of 2009, the SLP rebate was $0.0015. Multiply that by millions of transactions per day and you can see where part of the profits for high frequency trading comes from.

The SLP was introduced following the collapse of Lehman Brothers in 2008, when liquidity was a major concern for investors.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Quantitative Trading — Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify trading opportunities. Price and volume are two of the more common data inputs used in quantitative analysis as the main… …   Investment dictionary

  • Day trading — This article is about the practice. For the occupation, see Day trader. Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close… …   Wikipedia

  • Electronic trading platform — an Electronic Trading Platform being used at the Deutsche Börse In finance, an Electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary. This includes… …   Wikipedia

  • Commodity trading advisor — A commodity trading advisor (CTA) is an asset manager who follows a set of systematic investment strategies in futures contracts and options on futures contracts. The advisors originally operated predominantly in commodities markets, but today… …   Wikipedia

  • Ultrafast Trading — A lucrative and highly competitive method of stock trading that uses special software that works in milliseconds to make trades in reaction to market changes. This type of trading has been criticized for worsening stock swings and for unfairly… …   Investment dictionary

  • Multilateral Trading Facility — A Multilateral Trading Facility (or MTF) is a specific type of European financial trading system. The concept was introduced within the Markets in Financial Instruments Directive (MiFID)[1], a European financial law, and describes a trading venue …   Wikipedia

  • January 2008 Société Générale trading loss incident — The January 2008 Société Générale trading loss incident was an incident in which the bank Société Générale lost approximately €4.9 billion closing out positions over three days of trading beginning January 21, 2008, a period in which the market… …   Wikipedia

  • Automatisierter Handel — Unter Automatisiertem Handel oder Algorithmischer Handel (auch Algorithmic Trading, Algo Trading, Black Box, High Frequency Trading, Flash Trading[1] oder Grey Box Trading) versteht man umgangssprachlich den automatischen Handel von Wertpapieren… …   Deutsch Wikipedia

  • Renaissance Technologies — LLC Type Private Industry Investment Management Founded 1982, New York Headquarters …   Wikipedia

  • Salle de marchés — Une salle de(s) marchés est une salle où sont rassemblés les opérateurs de marché intervenant sur les marchés financiers. Salle des marchés de RVS L usage désigne souvent la salle des marchés par le terme de front office. Les pays anglo saxons et …   Wikipédia en Français

  • Market Intelligence — (often contracted to MARKINT) is a relatively new intelligence discipline that exploits open source information gathered from global markets. It relies solely on publicly available information such as market prices and ancillary economic and… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.