Notable Quotes on High-Frequency Trading

By: Ray Pellecchia

File Under: NYSE, NYSE Amex, NYSE Arca

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I've been kind of busy lately to post very often. (Curse you, day job, but don't ever leave me!) Anyway, from my clipboard, here are some recent notable quotes on high-frequency trading (HFT):

Being smarter and faster than your competitors, whatever your business, has been a guiding principle of companies worldwide for decades. So why are these ideas suddenly thrown out when it comes to high-frequency trading models that have been around for nearly a decade?
-- Kevin McPartland, Senior Analyst, The Tabb Group, in Waters magazine, "Competitive Edge or Unfair Advantage?"

Two areas high-frequency shops aren't too worried about are flash orders and dark pools. Several panelists said high-frequency firms don't interact much with flash orders and aren't bothered that the SEC may eliminate them.

The firms also aren't too concerned about the prospect of new regulations around dark pools. If anything, they said, they welcome rules that would push more orders into the public markets.
-- Nina Mehta, Traders magazine, "High Frequency Traders Strike Back"

But in my view, the [New York Times] article ended up conflating flash orders and high-frequency trading in ways that would confuse a general reader. Instead of noting that some HFT firms incorporate information from flash orders into their data and strategies, the article joined the two at the hip.

Flash orders clearly deserve attention. High-frequency trading, and the effect this trading activity may have on markets, deserves closer attention. Other market-related issues tossed into this melee also deserve attention. But when a conversation starts out as a shouting match, there’s nothing to do but pick sides.
-- Nina Mehta (yes, again -- no journalist has covered the subject more closely) this time in Columbia Journalism Review (from August but still readworthy if you haven't seen it)

We too have been trying to get more facts out there, with posts by my colleague Steven Poser here (about how HFT helps narrow spreads in large-cap stocks) and here (about how designated market makers make a difference in smaller-cap stocks, which are not traded as heavily by high-frequency types).

More to come on this topic, as you know.

Gotta go now and get back to my National Punctuation Day celebratory activities. Checking on my Official Meat Loaf of National Punctuation Day, which is in our little microwave down the hallway. Shall I save you a slice? And have you checked out Dan Labovitz's favorite punctuation mark, or Rick Farber's? And I would talk about aposiopesis but--