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The Is The One Financial Product Now Targeted By The HFT Swarm
When we disclosed the ridiculous trading record of HFT gigafirm (in the parlance of our times) Virtu, which showed one trading day loss in four years, we pointed out one thing: why reveal the magic sause and share the profits with mortals? In other words, why cash out now? The obvious implication is that the party is now ending as confirmed by Vincent Viola's decision to chop of a piece of his money cow and lock in his equity stake profits: one doesn't do that if one sees unlimited growth potential.
In order to determine if there is indeed truth behind the speculation that growth may have topped out, we decided to break down Virtu's 2013 net trading income by product line. We were not surprised to find that of the $45 million in total growth, the largest income category, US stocks growth was a tiny 5% of all, rising by $2.3 million in 2013, half the $4.5 million growth a year earlier. In fact, between EMEA, APAC and US Equities, there was very limited growth in 2013, while commodities posted an outright trading income decline. So indeed, it appears to be the case that growth in conventional products has indeed plateaued, as more and more HFT competitors rush in.
And yet, one product stood out. It is highlighted on the chart below: FX.
Sadly, with increasingly more homo sapiens-type banker FX traders being laid off left and right for pervasive and ubiquitous manipulation of currencies (who can forget the infamous "Cartel" chat room, JPM's head of spot trading presiding), what this means is that more and more algos will rush into this product to fill the voids left by carbon-based traders.
And for those trading FX, our condolences: because the typical bizarro, idiot moves that previously were reserved for stocks are now sure to take over the final bastion of capital markets. In other words, the next time you feel like the USDJPY is trading as if it is in need of a software update, you will be right.
Then again, in a world in which FX is the one battleground where central bankers now joust every minute, we can't wait for the reaction when some fat finger algo decides to take USDJPY higher by 1000 pips, or crashes the EURUSD by 2000, "just because." Surely the look of sheer panic on the faces of "central planners" everywhere in that particular "Jerome Kerviel Kodak moment" would be even more priceless than the stock of VRTU upon IPO. Speaking of, we wonder: will VRTU algos ramp VRTU stock to infinity, or is there some conflict of interest here?
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Yes please attack all those fiat currencies. This should accelerate their death. Sounds fucking great to me.
Talk about slitting your own throat...
(just trying to be optimistic)
FX Wars, The Final Countdown ~ [Don LaFontaine voiceover] In a world where carry trades literally determine the domestic & even foreign policy of nations, the algobots just became self aware, bitchez.
IT'S THE FX COUNTDOWN [Music Blares]
We're leaving together,
But still it's farewell
And maybe we'll come back,
To earth, who can tell?
I guess there is no one to blame
We're leaving ground
Will things ever be the same again?
It's the FX countdown...
We're heading for Venus and still we stand tall
Cause maybe they've seen us and welcome us all
With so many light years to go and things to be found
I'm sure that we'll all miss her so.
So music, much rock.
http://www.youtube.com/watch?v=9jK-NcRmVcw
And hair.
Are we heading to the Salezar system?
It's easy to HFT stawks. They have choke points at the exchanges in NY. But the bond and FX markets although larger, are much more diffuse and harder to game.
Please, if you have the power to create infinite credit you can game any "market".
Hedge accordingly.
No worries. Fat finger trades will be cancelled by the exchanges. They will protect their own....and their franchise.
Good luck with that, .. try unwinding 100Billion in trades
If only there were a single world currency to get rid of this pesky volatility that will someday cause a catastrophe. We need a catalyst....
But you can't arbitrage that...
I suppose they'll find some way, though...
SDaR Wars
Yeah...because people are interchangeable widgets and all countries are alike. Just ask the EU.
if (ticker == VRTU) begood()
else snafu();
They are just taxing all FX and options trades. Better them than the gubbermint.
I really think zerohedge is mistargetting their anger a bit. If you adjusted the P&L of some of these firms for the amount of liquidity they provide and trading they do, it wouldn't look nearly as impressive. Compared with major investment banks, which pull in BILLIONS/QUARTER, virtu is a joke. The worst possible outcome for investment banks would having more and more products completely change over to an open competitive electronic market place. The people that have the most to win by taking down hft are the big banks. If anything, zerohedgers might consider an enemy of the enemy as a friend.
Yes, but I think it's safe to safe to say that the TBTF banks are also using HFT. In fact I know an excellent programmer/code writer that went to JPM almost three years ago now to "help them be well-positioned in cryptocurrencies."
New world order, same old lies.
Humans? Who needs humans? They cost too much, complain.
When unemployment reaches 100%, the stock market will take off!
Would you play poker against a player that knows your hand? If not, be careful on which table you sit at the financial casinos.
Just trade FX KNOWING what is going on. Don't trade on fundamentals.
Go with the flow, and for christs sake don't be short anytime after 1200 GMT in a yen cross.
Such a VRTU-ous company will monitor that conflict of interest
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The Is The One Financial Product Now Targeted By The HFT Swarm"
So, this headline sat there, unedited, for 3 hours and counting now?
Not surprising. When banks are guaranteed to make money, why not front their moves and earn money on their business. Also, a great way to boost your own profits externally. Nudge nudge. Gross FX volumes are massive compared to equities. And much easier for parasites.