The in's and out's of High Frequency Trading

As day two began, Matt Samelson, Woodbine Associates, opened with a discussion on one of the 'hot topics' of this year's event- High Frequency Trading. He acknowledged the fact that to many, even traders, HFT is still a new and confusion-filled idea. Therefore, Mr. Samelson went on to describe HFT as a general term used to describe a model of trading that generates returns through the rapid turnover of many small positions in one or more financial instruments. To clarify further, he went on to describe what does not qualify as HFT, briefly mentioning things like program trading, flashorders, and low-latency execution. The lecture continued by focusing on the strategies that have been employed by HFT, which include Index Arbitrage, Event Arbitrage, and Information Arbitrage.

So, is HFT good for us and what is all the fuss about? Well, as Samelson claimed, HFT, in total, accounts for over 45% of our daily trading. Fortunately, Samelson reminded us that for the most part HFT does not hurt traders; however, he warned us to stay away from the 'toxic' strategies and that all trading involves risk.