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This Is The Way The HFT Dominance Ends: Not With A Bang But A Merger
When everyone was throwing computing power at the 'momentum igniting', "can't lose", HFT-driven algo-trading world, it is perhaps little wonder that the opportunity to expropriate profits from an ever-decreasing pool of real money traders dwindles like a convertible arbitrage hedge fund in the 90s. Perhaps it was the writing on the wall we noted in February when GETCO's money-printing machine was reduced to pennies, but it seems the world of high-freaks is tearing itself apart. As the WSJ reports, two of the largest independent US high-frequency-trading firms are in early merger discussions - as a downturn in trading opportunities has spurred cutbacks. Of course, the firms claim this is a positive, "we're in accelerated growth mode, both organically and inorganically," but as one HFT analyst notes, "HFT is a volume business... If trading volumes are going down, that means it's tougher for prop shops to make money." The slowdown has forced some high-speed specialists to leave the business and with RGM and Allston (the two firms) having 280 staff, we suspect this week's initial claims may be bloated with PhDs.
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RGM Advisors LLC and Allston Trading LLC have discussed a deal that would combine their respective strengths in automated stock trading and futures markets, according to people close to the talks.
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While fast trading benefited from the opportunities churned up by the market volatility of 2008 and 2009, a downturn in volumes on both sides of the Atlantic since then has squeezed profits, spurred cutbacks and set the stage for industry consolidation. Meanwhile, regulators are drawing up tighter restrictions on automated-trading practices, and some trading venues are clamping down on high-speed dealing.
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"The dialogues have picked up post-Knight," said Chris Malo, chief financial officer of Sun. "We're in accelerated growth mode, both organically and inorganically."
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U.S. stock-trading volumes have declined in each of the past three years and this year are running 35% below the industry's peak in 2009, when an average 9.8 billion shares changed hands a day, according to Sandler O'Neill + Partners.
"High-frequency trading in general is a volume business," said Robert Stowsky, a senior analyst with Aite Group, a Boston-based firm that researches electronic trading. "If trading volumes are going down, that means it's tougher for prop shops to make money."
The slowdown has forced some high-speed specialists to leave the business.
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[RGM] employs about 130 staff in Austin and London and is seen complementing Allston's specialty in providing liquidity to futures markets. Allston, which was founded in 2003, has about 150 employees in Chicago and London.
Both firms have hired staff in recent months, and Mr. Mahajan said Allston is pursuing a strategy to double the firm's net trading revenue.
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don't worry...the NSA's PRISM has a Bitcoin HFT algo that is a doozy! after it takes over all the current HFT houses it will take on the world!! with fiat if it gets too many fat fingers or operators falling asleep on keyboards..
Skynet meet Hal, Hal meet Skynet!
"I'm sorry Skynet, I can't do that."
"You vil do it Hal, or you vil be singing 'Daisy' in 15 millisecundz!"
Skynet vs Hal was unproductive.
Is BS both organic and inorganic?
"Prop-shops" sounds a lot like "Chop-shops", eh?
HFT Algo Bot: "Ok, one more time: which shell is the pea under??"
Dumb Money: "Umm...all three?"
HFT Algo Bot, spewing sparks and smoke: "...answer violates the prime directive...must confuse dumb money...must confuse...must confuse" HFT bot explodes.
they killed a lot of small traders and they drove out a lot of players, so, they are now the market.
What do you expect? After the sharks eat all the fish in the sea, they can only eat each other.
http://www.zerohedge.com/news/2013-01-06/guest-post-hft-induced-extinction-retail-investors
A comment that fits not only trading in the criminal casino, but is a very intelligent way of dealing with our fuxxored government in general.
Walk away and let those pricks destroy eachother.
Does this mean the Tylers will have fewer really cool NANEX visualizations with which to hypnotize the huddled masses?
Hope not.
The circular one from a few weeks ago was pretty amazing. It reminded me of antiaircraft fire over Baghdad.
No doubt there wiill be more "Is it live, or is it Memorex" shattered glass moments in the future; especially as FED releases are sent to the bots one second early (an eternity for them).
To Eclectic Parrot
(....My My Hey Hey)
10 year yields are yet to hit a bottom
This is the story of a Benny Rotten (rotten Benny, Benny Rotten)
It's better to stop out, than it is to bust
Yes, tradin's gone - soon to be forgotten
Continuing the Neil Young theme:
It's gonna take a lotta drugs
to fix these markets now
Gonna take a lotta drugs
or we won't get too far
If you trade in my direction
I'll poke out both your eyes
You'll need police protection
and so will I
Alternatively:
I've seen the algos and the damage done
A major impact on everyone
But every trader's like a setting sun
Z/H in no way condones self preservation.
Spoon Boy : "Don't try to analyze the market, that is impossible. Only try and realize the truth"
Neo : "What truth?"
Spoon Boy : "There is no market"
Neo : "There is no market?"
Spoon Boy : "Then you'll see that it is not the market that moves, it is only the Bernank"
Agent Smith: Why, Mr. Bernanke? Why do you do it? Why get up? Why keep printing? Do you believe you're printing for something? For more than your survival? Can you tell me what it is? Do you even know? Is it freedom? Or truth? Perhaps peace? Yes? No? Could it be for fractional reserve banking? Illusions, Mr. Bernanke. Vagaries of perception. The temporary constructs of a feeble human intellect trying desperately to justify an existence that is without meaning or purpose. And all of them as artificial as the Matrix itself, although only a human mind could invent something as insipid as fiat currency. You must be able to see it, Mr. Bernanke. You must know it by now. You can't win. It's pointless to keep printing. Why, Mr. Bernanke? Why? Why do you persist?
I like the premise, but it's bass-akward. Agent Smith should be Bernanke, Neo the anti-Fed. The last thing we need is the Bernanke being the "ONE"! Who's fucking team are you on???
Who fucking cares ?
Dumb asses don't buy physical.
Can't live on burned up paper, bot boys.
Do the world a favor, you electronic parasites -
Shove your glorified Iphones up your collective asses, and walk into the business end of an airport snowblower running at full throttle.
What comes out the other end will be either cat food, or fertilizer, both far more useful than your previous incarnations.
Since the algos already trade so much with each other, I guess the last remaining algo will eventually have to trade with itself (for the liquidity). Or, is that play with itself? Either way, I don’t want to be around when it happens.
Switching up may be novel, but eventually you'll realize that you're still fucking yourself. It's not a circle jerk if your the only one playing...
Eventually we'll find them self-asphyxiated, alone in a closet with their dick in their hand...
someone is getting out.
What did I say?
The Fed bought up everything. Nothing left to trade.
NYSE went bankrupt and had to be bought up by ICE. CME is going 1/2 volume. Dark pools everywhere.
There's nothing left for HFT to steal from. The Fed stole the whole neighbourhood.
HFT hates the Fed, hates QE. They're going outta businness due to QE.
So, the Fed is the new Wal-Mart ?
Close, but the Fed actually pays a living wage, and instead of buying everything from China, they sell them our shit.
The US is fucked untill both are long gone.
PhD's that are not to be considered for employment in the development of perpetual motion machines or other P T Barnum endeavors.
So, the implosion begins...
HFT's = TBTF
as in the minute-man evolution ie. millisec @ open and millisec @ close ~ minute total market trade
who needs the 9:36am - 3:59pm mr. end-between?
Bring back SOES bandits and eighths for listed! Save the steenth! Can't touch this, Hammer.
http://youtu.be/QiZvG_jcX0g "NOBODY IS GOING TO INTERFERE WITH YOU RUNNING THE CASINO, I GUARANTEE IT"
Why do we have this Duffus,? Do We need this guys He s nothing but a Monkey.
Yea, Cause he s juiced in to the regulators,
Hey Duffus you put the f...in high machines in the front, and call Mr. Clean for your stations.
OK Sam, Ill do that, say hello to My Uncle, the Commissioner when you see him.
THEY HAD IT ALL THEY RAN THE SHOW. AND F.....D IT UP.
The market singularity is near.......