31 May '12, 10pm

Every microsecond counts: @YaleSOM professor X. Frank Zhang talks #technology & #trading via @IEEESpectrum

These traders were taking information about what orders were in play in the market and using it to predict how prices would most likely shift. Armed with that knowledge, they would buy and sell stocks or other instruments and sell them again within minutes or even seconds, most likely accruing only a tiny amount on each share traded. But the tiny profits can quickly add up, given the enormous number of transactions. People like Zhang, on the other hand, have to manage long-term investment portfolios. So even if they studied the high-frequency traders’ patterns and strategies, it wouldn’t help them do their jobs. A study of U.S. financial markets that Zhang conducted in 2010 showed that high-frequency trading was responsible for 78 percent of the dollar trading volume in 2009, up from near zero in 1995. Other estimates are somewhat lower, but most are still well over 50 per...

Full article: http://spectrum.ieee.org/computing/networks/the-microseco...

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