HFT-The Fast and Furious
We have written on the HFT subject for some time. The Economist joins the debate;
ON FEBRUARY 3RD 2010, at 1.26.28 pm, an automated trading system operated by a high-frequency trader (HFT) called Infinium Capital Management malfunctioned. Over the next three seconds it entered 6,767 individual orders to buy light sweet crude oil futures on the New York Mercantile Exchange (NYMEX), which is run by the Chicago Mercantile Exchange (CME). Enough of those orders were filled to send the market jolting upwards.
A NYMEX business-conduct panel investigated what happened that day. In November 2011 it published a list of Infinium’s alleged risk-management failures and fined the firm $350,000. Infinium itself neither admits nor denies any violation of the exchange’s rules. It takes the same line on a $500,000 fine it was given at the same time for alleged transgressions on the CME itself in 2009. (Full article here.)
Rise of the Machine chart below.