3 ms·
You're making good points, but one thing I want to emphasize is that latency is not the sole dimension of competition in HFT space. Certain things may just be
by dcolkitt 6y ago
You're making good points, but one thing I want to emphasize is that latency is not the sole dimension of competition in HFT space.
Certain things may just be "table-stakes", but for many strategies table-stakes is the only requirement. Simply being "fast enough" may be fine if you have a smarter model, exploit niche opportunities overlooked by others, or are willing to shoulder certain risks that other HFTs are trying to offload.
To take this to the extreme, look at Renaissance's Medallion fund. It's certainly the case that much of what they're doing is "HFT-ish" in the sense that they're executing high turnover, high Sharpe strategies with short holding periods. Yet they've managed to continue to be successful from the 90s well until the age of HFT, without competing very hard on latency at all.
Markets are an ecosystem, and like biological ecosystems there isn't just one trait that predicts dominance.
- unwoundmouse 6y agowhat's your source for the fact that they are not competing on latency?
- qeternity 6y agoIt’s difficult to compete on latency and remain anonymous.
- vmception 6y agocorrect, there is a peculiar nuance on financial trading topics where people conflate "computer executed trade" with "high frequency trading" you may need to rapidly adjust the expected fill price at a high frequency on a multi leg strategy being run in 100 positions, but the actual sending orders to the exchange doesn't need to be high frequency, and it is an important distinction that you wouldn't be competing with others on the frequency at this stage, it doesn't matter if this occurs in 1 millisecond of 500 milliseconds, even a couple of seconds. Very different ballgame than the wishful femtosecond game. its probably better that people don't understand that, but it is annoying that there are this many roadblocks to a nuanced conversation either way your servers still have to have all the authentication code, and various algorithms running to monitor the tape.