HFT, Correlations and Trend Following

23

March, 2012

In yesterdays note, we referenced a paper written for the United Nations Conference on Trade and Development titled The Synchronized and Long-Lasting Structural Change on Commodity Markets: Evidence from High Frequency Data We wanted to go into a bit more detail today on the paper. The paper states that the E-Mini S&P 500 futures contract is the most traded index futures contract in the world. There were 121 million trades in it in 2011. This is a 450% increase since 2007 when there were only 22 million trades. The

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One Response to “HFT, Correlations and Trend Following”

DavidC
March 27th, 2012 at 5:32 am

Joe, Sal,
The picture at the top of this post says it all! I remember one of Joe’s appearances on Bloomberg TV when he said that HFTs and algos exacerbate moves up or down purely as a result of the computers jumping on the back of any move so that it becomes larger in magnitude that it might otherwise have been.

Great when the markets are going up (for some) but not so great when the market falls, which it will do at some point, given that NOTHING has changed since 2008. Oh, I tell a lie, the US deficit is TWICE what it was then, the reatil market has been pulling money out of the stock market, the Fed is leveraged up over 50 to 1, etc etc!

Another comment of Joe’s I remember was where he said that when the trapdoor is opened there will be nothing to stop another Flash Crash because the algos will all STOP.

Keep up the great work gents, I’m looking forward to your book (any chance of ordering an autographed copy?!).

DavidC