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Webinaire de Finance Watch à propos du trading à haute fréquence

Finance Watch Webinaire de Finance Watch à propos du trading à haute fréquence

“The speed-of-light limitation is getting annoying” (Andrew Bach, NYSE)

L’émergence du trading à haute fréquence (THF) est un des dossiers chauds dans le monde des marchés financiers en ce moment. Une discussion équilibrée prend enfin place entre les législateurs, les superviseurs et l’industrie à propos d’un cadre réglementaire pour ce qui est devenu une caractéristique dominante des marchés financiers.

Le THF renvoie à l’ensemble des stratégies de trading conçues à l’origine pour exploiter les connections à très faible latence. Cette page rassemble plusieurs ressources utiles, avec entre autres les dernières recherches académiques, le cadre réglementaire, les commentaires de l’industrie et de la presse.

Pour une simple explication du fonctionnement du THF – lire cet article (en anglais) this article.

Présentation

Aux yeux de Finance Watch, le THF génère du volume plutôt que de la liquidité utile. Soit il est construit sur des stratégies directionnelles (trend following) qui créent du volume mais enlèvent de la liquidité, comme le prouve leur impact sur le marché, soit sur des stratégies de soi-disant ‘tenue de marché’ qui en recueillent les privilèges mais qui en réalité ne fournissent aucune liquidité, car la profondeur limitée et la durée en milli-secondes de leurs ordres enlèvent aux vrais investisseurs l’opportunité d’opérer d’importantes transactions quand ils en ont besoin. Le THF menace l’équité, l’ordre et l’intégrité des marchés.

Pour une explication plus détaillée sur le fonctionnement du THF et les dangers qu’il induit, voir le chapitre III de la prise de position de Finance Watch sur la directive MiFID, “Investing not Betting” (Avril 2012).

FPour une revue de la littérature scientifique récente et le point de vue des autorités publiques, cliquer ici.

Est-ce que les écarts de prix ont vraiment diminué?

Lire cette recherche de NANEX : cliquer ici

Cliquer ici pour regarder Benoît Lallemand à la Trading Room du Financial Times. Benoît est un analyste senior de Finance Watch et l’auteur de la prise de position ‘Investing not Betting »:

Finance Watch Webinaire de Finance Watch à propos du trading à haute fréquenceCliquer ici pour regarder : ‘’Des rats dans le grenier à blé’ : le bras-droit de Warren Buffet a peu d’affinité avec le THF’.
Finance Watch Webinaire de Finance Watch à propos du trading à haute fréquence

Cliquer ici pour regarder le court documentaire de CBS sur le THF.

Finance Watch Webinaire de Finance Watch à propos du trading à haute fréquence

Les dernières recherches académiques

Pour un bref aperçu odes dernières recherches académiques sur le sujet, voir Schroders / RBC Capital ‘Special report: High frequency trading’ (Nov 30, 2011)

Pour une revue détaillée de la littérature scientifique, , voir Leuchtkafer, R.T., “Evidence-based studies of unregulated market making and high frequency trading”

Selected highlights:

Federal Reserve Bank of Chicago, “How to keep markets safe in the era of high-speed trading” (October 2012)

Egginton, Van Ness and Van Ness, “Quote Stuffing”, March 15, 2012

We find that during periods of intense quoting activity stocks experience decreased liquidity, higher trading costs, and increased short term volatility.

Financial black swans driven by ultrafast machine ecology, collective research by 7 academics (February 2012):

The downside of society’s continuing drive toward larger, faster, and more interconnected socio-technical systems such as global financial markets, is that future catastrophes may be less easy to forsee and manage — as witnessed by the recent emergence of financial flash-crashes. (…) Here we analyze a set of 18,520 ultrafast black swan events that we have uncovered in stock-price movements between 2006 and 2011. We provide empirical evidence for, and an accompanying theory of, an abrupt system-wide transition from a mixed human-machine phase to a new all-machine phase characterized by frequent black swan events with ultrafast durations (<650ms for crashes, <950ms for spikes).

Zhang, Frank Yale School of Management , ‘High-Frequency Trading, Stock Volatility, and Price Discovery’, (December 2010)

I find that high-frequency trading is positively correlated with stock price volatility after controlling for firm fundamental volatility and other exogenous determinants of volatility. The positive correlation is stronger among the top 3,000 stocks in market capitalization and among stocks with high institutional holdings. The positive correlation is also stronger during periods of high market uncertainty. Furthermore, I find that high-frequency trading is negatively related to the market’s ability to incorporate information about firm fundamentals into asset prices.

Biais, Bruno, Foucault, Thierry and Moinas, Sophie, ‘Equilibrium High-Frequency Trading’ (March 15, 2012)

Because of the negative externality it generates, HFT will attract an equilibrium amount of investment exceeding the utilitarian optimum. This suggests that Pigovian taxes, such as, for example, taxes on colocation, could improve utilitarian welfare.

Boehmer, Ekkehart, Fong, Kingsley Y. L. and Wu, Julie, ‘Algorithmic Trading and Changes in Firms’ Equity Capital’ (May 4, 2012)

We find that greater AT (algorithmic trading) intensity is, on average, associated with declines in equity capital in the next year. This result is only partly driven by a decline in new securities issues; rather, greater AT intensity is associated with an increase in repurchase activity.

Cadre réglementaire

ESMA guidelines (applicable since May 1, 2012)

IOSCO, Technical Committee of the International Organization of Securities Commissions (IOSCO), ‘Regulatory Issues Raised by the Impact of Technological Changes on Market Integrity and Efficiency – Final Report’, FR09/11 (October 2011)

ESRB response to the ESMA Consultation paper on ‘Guidelines on systems and controls in a highly automated trading environment for trading platforms, investment firms and competent authorities’, September 2011

Bank of England, ‘The race to zero’, Speech by Andrew Haldane (July 8, 2011)

Findings regarding the market events of May 6, 2010: Report of the staffs of the CFTC and SEC to the joint advisory committee on emerging regulatory issues’, September 30 2010

Foresight Project survey of end-users

Commentaires de l’industrie

Schroders / Royal Bank of Canada Capital Markets ‘Special report: High frequency trading’ (Nov 30, 2011)

CA Chevreux (full service broker)

Nanex (real time market data provider)

Themis Trading (institutional agency broker)

New book by Sal Arnuk and Joseph Saluzzi of Themis Trading: “Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio”(24 May 2012)

Articles de presse sur le THF

03-12-2012: New York Times “High-Speed Traders Profit at Expense of Ordinary Investors, a Study Says”

29-10-2012: EurActive “MEPs approve ban on ultrafast trading”

23-10-2012: Evening Standard “Trading that needs severe regulation”

17-10-2012: Financial Times “Rage against the machine”

“The question that must be asked is who does the market serve? Is it to focus on companies raising capital and create long-term wealth for individuals or is it to cater to guys trading for rebates and sub-pennies?” (Ken Polcari, a floor trader at the New York Stock Exchange)

26-9-2012 New York Times “Beyond Wall St., Curbs on High-Speed Trades Proceed”

17-9-2012 Financial Times “Australian exchange chief criticises HFT”

17-9-2012 Le Vif / L’Express  “Trading ultra-rapide: une ONG compare l’industrie financière au lobby du tabac”

16-9-2012 The Guardian “Britain opposes MEPs seeking ban on high-frequency trading”

16-9-2012 Financial Times FTfm “Time for more investing and less betting”

13-9-2012 Reuters “ECB’s Nowotny calls for high-frequency trade ban”

21-8-2012 Financial Times “Knight glitches hit confidence in US market”

13-8-2012 Financial Times “Australia clamps down on ‘algo’ trading”

11-8-2012 The Economist “Wait a second – The latest cock-up on Wall Street shows that more safeguards are needed”

10-8-2012 The Trade “Leading MiFID II MEP backs German HFT law”

9-8-2012 Novethic “Taxer la finance : le dispositif français devient concret” [Taxing finance: the French measure becomes concrete]

3-8-2012 Wired “Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading”

1-8-2012 La Tribune “Encadrer le trading à haute fréquence… POUR ou CONTRE ?”

22-6-2012 Bloomberg “Wash Trading by High-Frequency Firms Said to Face U.S. Scrutiny” 

25-6-2012 MLex (with permission) “Les Bourses mondiales lancées dans une course à la microseconde”

17-6-2012 Financial Times “High speed traders look to restructure”

14-5-2012 The Independent “Brake sought on high-speed traders”

10-5-2012 Le Monde “Bruxelles veut encadrer les « traders à grande vitesse »”

9-5-2012 Financial News “Flash Crash ‘may occur again’”

8-5-2012 Bloomberg ‘Flash-Crash Story Looks More Like a Fairy Tale’

6-5-2012 Financial Times ‘US ‘flash crash’ measures suffer delays’

22-4-2012 Financial Times FTfm “Taking the betting out of investing”

22-4-2012 Financial Times FTfm “High frequency traders are ‘bad’”

24-4-2012 THE TRADE News “Serving the real economy”

24-4-2012 La Tribune “Le trading à haute fréquence menacé de limitation de vitesse”

25-4-2012 Financial Times “Madrid bourse overhauls trading system

25-4-2012 Europolitics “MiFID 2-MiFIR: Finance Watch spells out recommendations

27-4-2012 Le Monde “Les Bourses mondiales lancées dans une course à la microseconde”

Extract from Finance Watch letter to the Financial Times, 27 August 2012:

A favourite of the HFT lobby is to sow confusion between algo and HFT. Nobody wants to “pull the plug on the algorithms”, which would make no sense; in fact the Markets in Financial Instruments Directive proposals target predatory HFT as a subset of algorithmic trading.

HFT does not reduce “frictions”. HFT is about “technological front running”, which, despite it being legal, means that its profits are generated from deteriorated execution prices for institutional investors, including pension funds.

Nor does HFT bring useful liquidity: liquidity requires depth and a sufficient resting time in the order book which, by its nature, HFT does not bring.

Old and new forms of market abuse can now be executed on a scale and at speeds never seen before. Despite what the industry says, regulators are currently unarmed to detect it, with serious consequences for public trust in markets.

Investigation into high frequency trading by award winning BBC journalist Michael Robinson, 3 November 2009 (transcript).

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