Golden Networking’s High-Frequency Trading Leaders Forum 2010, May 27th, Flatotel Hotel, New York City, Now Available on DVD, 270 minutes with the Most Comprehensive Review of High-Frequency Trading
New York, NY, June 03, 2010 — A great lineup of speakers at GoldenNetworking.net’s High-Frequency Trading Leaders Forum 2010, “Innovating and Profiting from High-Frequency Trading in 2010 and Beyond”, discussed the industry evolution, new technological developments as well as the business threats and opportunities that high-frequency traders must be aware of. Within this scope of topics, they elaborated on the increased operational complexity and the importance of speed, algorithmic models, the human role in high-frequency trading, maintaining competitive advantage, as well as regulation and increased electronic access to markets. The complete program, which runs for 270 minutes, now available on DVD at http://www.hftleadersforum.com, features the most comprehensive review of High-Frequency Trading.
The prestigious roster included practitioners and academics from Chicago and New York, as well as journalists that closely follow the industry: Dr. Andrew Kumiega, Infinium Capital Management, Professor Ben Van Vliet, Lecturer, Illinois Institute of Technology, Mr. Manoj Narang, Tradeworx, Ms. Courtney Comstock, Clusterstock, Mr. John Netto, M3 Capital, Mr. James Leman, Westwater Corp., Mr. Erik Lehtis, DynamicFX Consulting, Mr. Richard Flom, Systematic Alpha Management, Mr. Jitesh Thakkar, Edge Financial Technologies, Professor Petter Kolm, New York University and Mr. Scott Patterson, The Wall Street Journal.
As systems are becoming a lot faster, speakers explained, high-frequency traders need to make sure their systems are running at the highest speeds, if their strategies require so to be profitable. Maximizing speed as well as reducing latency is paramount to a profitable high-frequency trading system. At the same time, the human role in high-frequency trading is vital. While the quants design the model and programmers code it, traders need to understand the model and actively monitor the system to make sure the algorithms are functioning in the manner they are supposed to. If an algorithm has gone wild, Dr. Kumiega said, a human being needs to take it offline, as many high-frequency traders did on May 6th. Moreover, to be successful in high-frequency trading, traders are required to perform an autopsy on bad trades and then provide feedback to R&D. Even when the system is making money, traders need to make sure that it’s because the algorithm is working properly, otherwise it will lead to losses down the road.
As to developing a trading system, first high-frequency traders have to know where to invest their resources, figuring out what can be outsourced and not wasting valuable time and capital reinventing the wheel. Focus should be on developing the algorithm or whatever it is that differentiates it from competitors. Professor Van Vliet outlined the seven sources of competitive advantage: (1) strategic creativity, having creative trading ideas, (2) quantitative improvement, do it better and more efficiently than your benchmark, (3) data cleaning and optimization, get a better look, (4) order execution, (5) transaction cost minimization, (6) Rapid Model Development (RMD), and (7) strategy portfolio management, each strategy is treated as a product production cycle.
Professor Van Vliet explained that after recognizing that a strategy doesn’t last forever, it’s imperative to have the capability to quickly deliver a new model that works according to specifications. Under this concept, a rigorous team-based approach is required to provide a consistent framework of four repeatable stages of system development: research, backtesting, implementation and management. The core and backbone of any high-frequency trading strategy is the algorithm that deciphers the data and makes the buy and sell decisions. Importantly, it shouldn’t just be one algorithm but a portfolio of them. Professor Van Vliet said that some firms run up to 50 algorithms at the same time, while only 12 are funded, allowing automatic and instantaneous fund allocation.
In regard to opportunities and the future for high-frequency trading, industry participants can expect greater access to electronic trading in more exchanges. In emerging markets, Singapore and India are particular points of interest in the near future, as is China in the long term; a lot of risk capital is on the lookout for investing opportunities in these markets. Additionally, participants can expect to see increased investment allocation from asset management firms. From an evolution stand point, participants can expect increased automation and greater speed requirements, and should recognize that latency arbitrage is part of the past. Model development ought to focus on building more robust systems with greater understanding of correlation and investor psychological behavior. As for regulation, participants need to remain vigilant and proactive for the threat of transaction tax, trade cancelation fees, as well as other regulatory changes that can potentially erode profitability.
The last keynote speaker, Mr. Narang, focused mainly on the role high-frequency trading played in the so called “Flash Crash”. He deplored the use of the term “flash”, and proposed instead the name “Seis de Mayo”, the Spanish translation for May 6th and a play with the Cinco de Mayo festivities. This time, though, the date marked the end of the Dark Age for high-frequency trading, which started after a July 2009 article in The New York Times, and the realization that high-frequency trading was not to blame for the market crash. UltraHighFrequencyTrading.com subscribers can access Mr. Narang’s explanation to Scott Patterson, The Wall Street Journal, in comprehensive detail, of what really happened in May 6th and why many high-frequency trading firms, including Tradeworx, stopped trading.
High-Frequency Trading Leaders Forum 2010 DVD Video Package is produced by Golden Networking (http://www.goldennetworking.net), the premier networking community for business executives, entrepreneurs, investors and diplomats, founded by former McKinsey consultant and Columbia Business School MBA Edgar Perez. Upcoming Leaders Forums and Business Networking receptions include:
High-Frequency Trading Happy Hour, (http://www.HFTHappyHour.com), June 8th, New York City
Real Estate Leaders Forum 2010, “Successfully Investing in Distressed Real Estate Assets” (http://www.RealEstateLeadersForum.com), June 17th, New York City
Panelists, speakers and sponsors are invited to contact GoldenNetworking.net by sending an email to [email protected]. Golden Networking has been frequently featured in the press, including recent articles in The New York Times, “Golden Networking Helps Job Seekers Make Overseas Connections” (http://www.nytimes.com/2009/11/07/nyregion/07network.html), Los Angeles Times, “Speed-addicted traders dominate today’s stock market” (http://articles.latimes.com/2010/may/16/business/la-fi-new-exchanges-20100516) and Columbia Business School’s Hermes Alumni Magazine, “10 Under 10” (http://www7.gsb.columbia.edu/alumni/news/ten-under-ten).
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Edgar Perez
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