There is an interesting article at BusinessWeek on HFT’s shrinking profits (link here). There was so much angst over HFTs driving the traditional trading models out of business. Now the success of HFTs have brought in so much competition that they are cutting the shrinking pie into small slices and forcing the less capable HFT firms to drop out.
- 2008 – 2011: HFTs did 2/3 of all stock trades
- 2013: HFTs does 1/2 of all stock trades
- 2009: HFTs moved 3.25 bn shares a day
- 2012: HFTs moves 1.6 bn shares a day
- Fell from a tenth of a penny per share to a twentieth of a penny.
- 2009: Entire industry made $5 bn trading stocks
- 2012: Entire industry made ~$1 bn trading stocks
- Trading volumes dropped
- Volatility dropped
- Increased competition from other HFTs
- Margins squeezed by exchanges and data centres
- Increased scrutiny by regulars
- More HFTs adopting momentum trading and automated news analysis.