10
Jun, 2010
10
Jun, 2010
This Bargain Study is Less Than Half the Price of The $8k Dudes! Woo hoo!
A $3,750 study instead of an $8,000 study that tells us that HFT adds liquidity and decreases spreads!
From Brandon Rowley’s Synopsis here:
http://www.twsinvestments.com/2010/06/where-is-hft-headed-world-research.html
“Next up was a half an hour presentation by Matt Samelson of Woodbine Associates titled “The Impact of High Frequency Strategies on Spreads and Volatility on Highly Liquid U.S. Equities”. The presentation was a summary of the $3,750 “ground-breaking study” available from the firm with their basic argument being that spreads tightened in 2/3 of the 39 most liquid stocks throughout 2008-09 and therefore the “traditional” market participant is better off, not worse off, as HFT has grown as a share of trading volume. While this presentation purported to defend HFT against attacks, it accomplished nothing in terms of engaging in the contemporary debate. While T3 Capital runs HFT strategies and welcomes defense against much of the misinformation out there, this presentation was sorely lacking only working to regurgitate old arguments. It’s as if he were a philosophy professor that taught Descartes’ Meditations and simply didn’t bother to acknowledge the circularity objection to the “I think, therefore I am” statement (even though I don’t believe this is a crippling refutation but that’s another discussion). The current debate has moved far beyond his presentation.”
Comment posted in response to Brandon’s Synopsis:
Brandon:
I read your comment on the Woodbine Associates presentation with interest. If you had listened attentively to the presentation, you might have correctly put it in context and represented it in your blog.
Do you recall what I said at the outset of my presentation? You missed a key point. I said:
“The conclusions in our study are nothing new. You’ve heard them before from groups of individuals with agendas, with anecdotal experience, or no experience at all. Our study is one of only three that we know of that uses numbers to support positions.”
Our study is ‘groundbreaking’ precisely in that it uses data.
I also suppose you also missed the individuals who approached me after the presentation who mentioned that it was “refreshing” in that we used numbers, explained how we used them, and mentioned strengths and weaknesses associated with our data. We have received equally favorable commentary from those who have purchased and actually read the paper.
I am not certain how you conclude that the presentation didn’t add anything to the current debate on HFT. Maybe you should check out Institutional Investor today. On their website, Michael Peltz released a lead article “Inside the Machine: A Journey into the World of High-Frequency Trading”. In it he speaks with numerous individuals prominent in the debate including Senator Ted Kaufman, Duncan Niederauer of NYSE Euronext, and Seth Merrin of Liquidnet. As usual, spin is rampant. But where is the data? Seems to me that – just like 3 years ago – anyone with a vested interest is running around saying whatever they want about HFT to further their own or their firm’s particular agenda. But as they used to say a long time ago: “Where’s the beef?”. No one provides any support for their viewpoint. Furthermore, if you have attended any other conferences in recent months, you would have noted that when it comes to high frequency trading, many individual still (over the 3+ years that HFT has been a prominent topic) can define it. So I’m a bit puzzled by your comment.
I’m also a bit puzzled about your Descartes “I think therefore I am” comment. Are you describing presentation style? There was nothing at all philosophical about the presentation. It was wholly data driven. Our conclusions were based on numbers. Our numbers came from a framework we created. The framework was created by individuals with more than 10 years of experience as front office practitioners. After 10 years of sitting on a desk working with order flow, one learns how different types of firms trade.
Now, I am more than happy for you to critique our study. Dispute our framework. Dispute the data. Dispute the metrics. Ask what it doesn’t answer and take the research a step further. That is productive. But if you choose to critique the study (and do so in a public venue), please be certain to support it with substantive conclusions based on facts and preferably data. Your colorful commentary does little for anyone’s cause – but it makes for good reading.
Matt Samelson
Principal
Woodbine Associates