“Look, I just made $82,000 in one second!”
says, Sergei Tchetvertnykh, pointing at a flashing spreadsheet on his desktop’s screen. Keep reading here:
Infinium executes between 500,000 and 1,000,000 trades each day. It is the largest trader on the TSX.
Anyway… some highlights:
1) “the danger is that nobody really seems to think of themselves as owners. How can management be accountable to investors who change every few seconds?”
2) “a lot of trading these days is disconnected from any economic reality or the fundamentals of companies.”
3) “There’s more liquidity and tighter spreads,” says Grujic. “How can that not be better?” More liquidity means anyone can get an order filled almost immediately at the market price.” (I include his quote to be balanced).
4) “Gaming, in the mathematical sense, is also very much a part of high-frequency trading. Other traders, whether they’re human beings or algorithms, often trade in patterns. Spot the pattern, and you might be able to trade against them. ”
5) Speed is so essential that high-frequency trading firms and traditional investment dealers have located computer servers a few feet away from stock exchange trading platforms. Infinium has two servers: one near Alpha Trading Systems Ltd.’s platform in Toronto, and the other near a TSX platform in the suburb of Markham (the exchange has another platform downtown). Transmission time for an order: less than a millisecond.
6) Risk is also a complex question. The high-frequency traders’ supercharged computers haven’t blown up markets—yet—but Caldwell says they have blown up individual stocks. Exhibit A: the investment bank Bear Stearns, which folded after its share price plummeted in March, 2008, even though then-SEC chairman Christopher Cox assured the markets that the firm was sound. “Bear Stearns did not commit suicide,” says Caldwell. “It was murdered.”
7) Yet they aren’t certain how big Infinium will get. Grujic says that “2,000 employees seems to be a natural place we could go.” Tchetvertnykh says he’d at least consider going public. “It would give us equity to bring in the best people.” He’d also consider selling out—he points out that Citigroup paid $680 million (U.S.) for South Carolina-based Automated Trading Desk LLC in 2007.
The most telling point of this article is ascertained by reading between the lines (or maybe it is not even that subtle). While HFT players were very secretive and media shy in the past, when they wanted to keep being the market’s best kept secret, today they are speaking out. They want exposure. They want people to know who they are. They want people to know how successful they are. THEY WANT TO CASH OUT. Whether in Canada, Redbank, West Coast, Lake Coast, or East Coast. I think we have seen their peak, at least in North America. Hopefully other markets learn from our experiences.