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Screenshot of a breaking news alert e-mail from Q2 2017
30 to 35 percent of transactions on EBS, an electronic trading FX platform owned by ICAP Plc, are high-frequency driven
A piece by Bloomberg today examines the shift of HFT strategies from the equities market into currencies. Fundamentals still drive the market over the short and long runs, though not quite in the minute to minute and second by second minutia of the price action HFT thrives on. If any market absorbs HFT best, it would be the $5.3 trillion foreign-exchange market.
Firms using the ultra-fast strategies getting scrutiny thanks to Michael Lewis’s book “Flash Boys” account for more than 35 percent of spot currency volume in October 2013, up from 9 percent in October 2008, according to consultant Aite Group LLC. It’s the opposite of equities, where their proportion shrank to 50 percent in 2012 from 66 percent four years ago, according to Rosenblatt Securities Inc.
As brokers get better at cloaking orders and volume shrinks in stocks, speed trading remains a growth business in FX market. “FX has ongoing liquidity throughout the day, no interruption in trading and fewer gaps in prices, which all allow for algorithmic trading to flourish,” Javier Paz, a senior analyst at Boston-based Aite Group, said in a phone interview. “Add to that the sheer size of the FX market and the limited number of traded products compared to equities, which means the liquidity tends to concentrate, creating tradable opportunities for high-frequency firms.”
“Any of the big names that are involved in the equity side are generally starting up FX businesses as well,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said of high-frequency trading in a phone interview.