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I read on http://www.thetradenews.com/Technology/HFT--Not-so-flashy-anymore/?p=2 (mirror):

Profits from HFT are estimated to have peaked for the industry at close to $5 billion in 2009. It is thought that now [2017] it is probably less than a billion dollars, spread over many more players,” he says.

I wonder whether this estimation is a consensus amongst industry experts, and if not what other serious estimations are.

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  • $\begingroup$ To me according to the quoted sentence it seems that the author claims that the cause for the decline in the HFT industry profit is that there are more players now than in 2009. However, I don't think there is a significant correlation between the fact that there are more members in a market and the outstanding capitalization of that market. Only the distribution of the profit changes, and is distributed among more players than before. $\endgroup$ – JejeBelfort Jun 26 '17 at 11:16
  • $\begingroup$ I doubt that's true; it's debatable if gross profit stays the same (more on that in a sec), but for the industry as a whole, even if gross profits stay the same, more players (with fixed cost) means less profit for the industry as a whole. Moreover, if you see the business of HFT firms as generating signals S > some treshold on expected profit, then with increased competition, then it's not unlikely that the there are firms iwth a lower threshold, leading to less overall industry profits $\endgroup$ – Bram Jun 27 '17 at 14:49
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    $\begingroup$ Here is a very good related article faculty.chicagobooth.edu/eric.budish/research/…. They find that the overall size of HFT arbitrage opportunities in the S&P 500 futures and ETF between Chicago and NY stayed roughly the same over the period from 2005 - 2011. They are only concerned with HFT arbitrage but most such firms also act as market makers. Here, profits are usually higher in volatile markets. A few HFT firms (Virtu, Flow Traders) are publicly listed and publish their results. For others you can often find at least some information in their reports. $\endgroup$ – LocalVolatility Sep 7 '17 at 21:16
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The best HFTs don't just "HFT" and concurrently run multiple strategies on the same underlying instruments. Therefore, in general these estimates most likely are lowballing the profitability. As a former COO of an HFT-brokerage-provider, I saw the underlying numbers and labeling what most call "HFT" is erroneous - yeah, they go flat at the end of the day, but many strategies have holding periods in the dozens of seconds to minutes. Anyone that gives you their estimates if not on the prop side is full of it. Best you can do - take a look at the public company Virtu, they are a large player. And as a public company you can get some insights into their profitability, if not their underlying strategies.

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Instead of looking at estimates, you can look at actual data. There's two well known and publicly traded HFT firms Virtu Financial and Flow Traders. Their earnings and financials are public.

https://www.flowtraders.com/investors#no-back

http://ir.virtu.com/investor-relations/default.aspx

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Another estimate from http://nordic.businessinsider.com/the-fastest-traders-on-wall-street-are-in-trouble-2017-8?r=US&IR=T:

Total revenues brought in by HFTs from equity trading have dropped over 85% from 7.2 billion USD in 2009 to 1.1 billion USD in 2016, according to data from the TABB Group. The consultancy expects revenues to slide to 900 million USD this year.

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