High-frequency trading – a discussion of relevant issues - Xetra
High-frequency trading – a discussion of relevant issues - Xetra
High-frequency trading – a discussion of relevant issues - Xetra
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<strong>High</strong>-<strong>frequency</strong> <strong>trading</strong> <strong>–</strong> a <strong>discussion</strong> <strong>of</strong> <strong>relevant</strong> <strong>issues</strong> May 2013Differentiation <strong>of</strong> “algorithmic <strong>trading</strong>” (AT) and HFTCommon factors <strong>of</strong> AT and HFT:• Pre-designed <strong>trading</strong> decisions• Used by pr<strong>of</strong>essional traders• Observing market data in real-time• Automated order submission, automated order management• No human intervention• Use <strong>of</strong> direct market accessTypical characteristics <strong>of</strong> AT excl. HFT• Primary agent <strong>trading</strong>• Minimize market impact (for large orders)• Significant positions overnight• Typical holding periods: days/weeks/months• Working an order through time and across marketsTypical characteristics <strong>of</strong> HFT• Proprietary <strong>trading</strong>• <strong>High</strong> number <strong>of</strong> orders, rapid order cancellation• Mainly spread and arbitrage income• No significant position at the end <strong>of</strong> a day (flat position)• Short holding periods, small margin per trade• Low latency requirement• Focus on highly liquid instrumentsSource: Gomber et al. (2011)3
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