7/25/2023 0 Comments Wall street desktop covers![]() ![]() “None of us knew what to do or what would happen next,” The Telegraph quotes Dave Lauer, a quant who was working on a HFT desk that day, as saying. This Flash Crash served as a wake-up call to some HFT practitioners. Then, just as quickly as it was lost, the exchange regained the value. When the NYSE’s online trading system froze, the supercomputers of Wall Street firms initiated sell orders, and in just a few minutes, more than $1 trillion in value on the NYSE vanished. Exhibit A is the “flash crash” that took place on May 6, 2010.Īccording to The Telegraph’s story, the volume of trades that day overwhelmed the New York Stock Exchange online trading section. But things don’t always work out as planned. HFT and machine-based trading have combined to generate billions in profits for the firms who do it best. When firms spend tens of millions of dollars are spent laying super-fast network connections between major trading hubs–like the Chicago Mercantile Exchange, the New York Stock Exchange, and the London Stock Exchange–expressly for the purpose of being able to execute transactions a few thousands of a millisecond quicker than competitors, you know that the trading game has changed substantially. But in the world of HFT, holding an asset for just few milliseconds too long can mean the difference between booking a million dollar profit or a million dollar loss. One could have a reasonable discussion on the merits of long-term, buy-and-hold investing. The fact is, machine based trading is a requirement, because humans could never initiate trades at the speeds and volume that today’s HFT operations need to make a profit. It’s common to have more trades executed in a single day than all of the trades over a 10-year space several decades ago. From the increase in short-term volatility and propensity for “flash crashes” to harnessing scientific genius away from traditional fields and using “quants” to pursue of ever-bigger profits, the computer and network arms race has already had an irreconcilable impact on the culture of Wall Street.Ĭomputers today already initiate about 70 percent of the buy and sell transactions on Wall Street, according to The Telegraph’s story. While the new system has unquestionably enriched some, the question becomes: Has it benefited the rest of us?Īn informative article in The Telegraph paints a fascinating picture of how machine-based trading and high frequency trading (HFT) is changing Wall Street. Where Gordon Gecko-types once dominated exchanges, today’s Wall Street is run by quantitative analysts who write the algorithms that run on the supercomputers that make the actual trades, using super high speed network connections to exchanges. The face of Wall Street has changed significantly over the last decade. Since 1987 - Covering the Fastest Computers in the World and the People Who Run Them ![]()
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