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Technology Stocks : The *NEW* Frank Coluccio Technology Forum -- Ignore unavailable to you. Want to Upgrade?

To: Frank A. Coluccio who wrote (40339)	4/11/2013 5:14:52 AM
From: axial	2 Recommendations Read Replies (1) \| Respond to of 46821

[IT Infrastructure] Struggling HFT Firms Focus On New Technologies ' High-frequency trading firms are facing more problems than ever before. A drastic slowdown in equities trading volume coupled with low volatility has systematically and ruthlessly chipped away at the profits of firms that are used to generating millions of dollars in revenue through rapid-fire buying, selling and rebates. While the industry faces a slowdown in cash equities for the second year in a row -- volume in the U.S. equities market fell 18.5% last year, according to TABB Group -- it has become increasingly difficult for high-speed trading firms to thrive while continuing to pay for superfast data feeds, telecom lines and other infrastructure that's required to stay in the HFT game. [...] Narang believes the high-frequency trading arms race is near an end. First, profits are lower, so there's less money available to subsidize a big research and development budget, and latencies already are close to zero, he says. "Driving them 50% closer to zero costs a lot, and for very little marginal benefit. It's a game of rapidly diminishing returns." Others, however, believe the chase for zero latency is far from over. The dozens of firms in the HFT game (no one knows exactly how many players there are), particularly the larger ones, are still investing in technology that will enable them to shave microseconds off transactions while complying with the latest regulations, says David Weiss, senior analyst at Aite Group. "You've got to be in [the latency race] to win it. You have to up your game." [...] Meanwhile, one technology that has been gaining traction recently among high-frequency trading firms is microwave. Since HFT players are typically located in or near city centers and send data over leased circuits on fiber optic networks, the use of wireless microwave signals that travel through the air, as opposed to through glass, lets data travel about 50% faster. Data traveling via microwave doesn't have to deal with refraction and can move along straighter routes, according to Interxion, a provider of cloud- and carrier-neutral colocation data center services in Europe. Fifteen to 20 trading firms are using radio technology to gain shorter round trips between New York and Chicago venues and do arbitrage between these locations, says Patrick Lastennet, Interxion's financial services director of marketing and business development. "We've had a lot of requests from service providers to acquire roof space and to have the right antennas, and a few trading firms are building their own networks." [...] Still, experts say any forthcoming regulatory changes won't alter the underlying fundamentals of technology. "Technology continues to improve, from fiber optics to leveraging microwave technology and faster processors. That experimentation and innovation will continue," says Chandan Sharma, global managing director of Verizon Financial Services. "The regulatory changes will simply make some of the business models [that] some high-frequency trading firms have either less or more profitable." Weiss agrees that regulations will have little impact on the activities of HFT firms. The underlying reason? The SEC and other regulators don't have the expertise that to really track high-speed traders and implement changes. "Law enforcement will remain outgunned, no matter what," Weiss says. "If you're a high-frequency trading hotshot, the last place you want to be is working for a regulator. High-frequency trading will be under scrutiny from regulators, but less than from investors." wallstreetandtech.com Sidebar: Isn't HFT Getting A Little ... Nuts? ] Jim