[deathflute]

It is quite puzzling why all of a sudden there is a rush to write about hft. Historically, systematic trading has been very secretive and quite understandably so. And now all of a sudden you can read about building hft systems on wordpress blogs. Either returns have virtually diminished from such strategies or in the view of recent popular backlash, there is a concerted drive to talk about it.

[yummyfajitas]

There is a third explanation - barriers to entry have come way down, so lots of amateurs have gotten into the business. Some of these amateurs are now talking about it.

[dedward]

Is that really HFT though?

It is my understanding that High-frequency trading takes advantage of milliseconds (or less) of latency and extreme closeness to the markets network-wise, and exploits that advantage to the trader's benefit.

It's a subset of algorithmic trading, and one that's contentious and starting to be widely considered an unfair market practice, as it leverages the actual mechanism of the market itself rather than just the market.

Are we really talking about HFT here or just algorithmic trading?

[yummyfajitas]

There is no clear dividing line between HFT and algorithmic trading.

Some amateurs do latency arbitrage proper, though that is more the province of big shops. Some are very short term (500ms-1000 second time horizon) speculators. Some do a combination of both - use HFT techniques to shave off pennies on longer duration positions.

[deathflute]

I agree. But if they are making money off it, then why are they talking about it? The trading community hasn't exactly been known for its altruism.

[MrMan]

There are lot more people doing it, and a lot more no longer doing it. A lot of the latter need jobs. Blogging is a great way to raise your visibility.

[jayruy]

i agree with this explanation - what will be interesting to watch is where these coders wind up:

* hyper-secretive buy-side firms like SAC decide there's a labor opportunity, and these blogs are shut down in short order

* some PG figure emerges to steer these promising technologists into the light; i know roger ehrenberg has tried to step to the plate in this regard and what i've gathered from the sidelines is that this is easier said than done

* they compromise on building sell-side execution platforms, who would be more tolerant (more apathetic is probably closer to the mark) of blogging and we start to see a real banking technology community form

the third option is the one i'm betting on and hoping for.

[tlack]

I think the reason is a little more simple and obvious then that. Programmers are naturally drawn to difficult "high frequency" environments (hence all the interest in how Google/Netflix/Facebook run, even though few people will ever work on a project needing more than a reasonable/predictable 4-8 servers) and math, and often have "a bit" of money in the bank (less than $100k) that they'd love to transform into a lot of money in the bank.

Plus those old school investment banker types are perceived to be unintelligent simplistic Philistines who couldn't possibly know all the latest cool computing techniques (which would give a clever programmer some more leverage).

[egiva]

Programmers (top programmers) are also drawn to the enormous compensation packages and bonuses that financial firms were offering in the 2000s - top talent in statistics, mathematics, engineering and programming went straight into the financial industry - and a lot of those guys ended up as the VPs of their perspective departments. So I agree with what you're saying if you're thinking about traditional banking (the Big Five) but Hedge Funds are generally made up of highly analytical, highly qualified nerdy types who dominate programming and computer science - we're talking top-of-class people drawn in by the money. They also work 80+ hours a week, so pick your poison!

[wladimir]

Indeed, information about HFT is slowly starting to leak into the open. This has historically happened with every new profitable trading strategy. It starts with one company doing it, then a few, then a lot (there's money in it), and then someone publishes an article about it and the cat is out of the bag. Slowly after becoming public the strategy becomes less and less profitable (more people get into the game). With systems like this, it's all about the information asymmetry.

[egiva]

Yeah, it is getting out and I think current press stems for some recent court cases. It's also not a new strategy - with at least 6-7 years in practice by most competitive hedge funds. If you studied non-linear mathematics, or genetic algorithms in the early 2000s, you would have seen a ton of journal articles on the subject, particularly involving currency trading.