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A History of High-Frequency Trading

A HISTORY OF HIGH-FREQUENCY TRADING (HFT) A Market Dominated by Machines |w INVESTINGA TRADING GUIDE 1602 Amsterdam Stock Exchange launches the world's first 17th Century stock exchange. Rothschilds were able to arbitrage prices of the same security across country borders by using carrier pigeons to relay information before their competitors. 1983 Bloomberg launches with $30 million investment from Merrill Lynch to build first computerized system to provide real-time market data, financial calculations and analytics to Wall Street firms. 1998 U.S. Securities and Exchange Commission (SEC) authorized electronic exchanges, paving the way for computerised High Frequency Trading (HFT) services that can execute trades 1,000 times faster than x 1,000 a human. * At the turn of the 215T CENTURY HET trades had an execution time of 2000 several seconds, whereas by 2010 this had decreased to milli seconds, High-frequency trading accounted for fewer than microseconds in 2010 and -10% of equity orders. « subsequently nanoseconds in 2012. * 2005 HFT makes up 35% – of equity trades in the US. 24 -1,000 Points (9%) 2010 2010 Flash Crash! HFT makes up 56% of equity trades in the US. On May 6th 2010, a computer-driven sale worth $4.1 billion triggered the May Flash Crash, where the Dow Jones plummeted 1,000 Points within a single trading day. Nearly $1 trillion was wiped off the market value, " as well a drop of 600 Points within a 5-minute time frame, before recovering Fixnetix 2011 moments later. The SEC and CFTC largely blamed HFT firms for the crash. Launch of Nano trading technology: a firm called Fixnetix developed a microchip that can execute trades in nanoseconds – equal to on billionth SEPT 2012 of a second. 1 Nanosecond = 0,000000001 seconds Dataminr launches brand new service with $30 million investment, which turns social media streams into 2012 actionable trading signals. Helps report the latest business news up to 54 mins faster then conventional Dataminr Estimated that HFT is responsible for 70% of all US equity trades. " news coverage. 1º 2012 IT companies invest millions on HFT technology. One new computer chip built specifically for HFT prepare trades in .000000074 seconds; a proposed $300 million transatlantic cable is being built just to shave 0.006 seconds off transaction times between New York City and London. 12 NOVEMBER 2012 April 2nd 2013 FBI begins to look into social media SEC and CFTC announce restrictions as a form of securities fraud due to its instant impact on stock markets. 13 on public company announcements through social media. 14 April 4h2013 Bloomberg Terminals incorporates live Tweets into its economic data service.Bloomberg Social Velocity tracks abnormal spikes in chatter about specific companies. 15 -143 Points April 23rd 2013 (1%) 1:05pm: A false Tweet sent by the Associate Press account stated that the White House was hit by two explosions and causes widespread panic on Wall Street. The Dow Jones plummets 143 points (1%) in 3 minutes from 14,699 to 14,555. A server farm situated in Washington DC can transmit data at the speed of light to New Jersey via superfast microwave transmission services. September 18th 2013 At 2pm, the Federal Reserved shocked the financial markets by announcing not to scale back its level of support to the economy. An estimated $600 million in assets changed hands in the Sept 2013 Italy becomes first country to launch levy on HFT, charging a levy of 0.002% on equity transactions lasting less than milliseconds before other traders in Chicago could learn of the news. 18 0.5 seconds. 19 2013 Economists continue to debate over the risks of HFT after the 2010 Flash Crash. Nobel Prize winning economist, Michael Spence, believes that HET should be banned. 20 @Investoo_com w INVESTING TRADING GUIDE * z * * "Fundamentals of Technical Analysis and Algorithmic Trading, Algorithmic Trading (Automated Trading Systems) and High Frequency Finance by Saeed Ebrahimijam “htp:/ * * ° 1° went-Capital-Markets-Johan-BlenGSV/12/6/2012/id/46352? page=full " 12 13 14 15 16 17 18 19 ®

A History of High-Frequency Trading

shared by addz123 on Oct 08
An infographic showing the history, risks and technology of frequency trading (HFT).






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