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Investment banks are driving down the volume of high-frequency trades on US stock exchanges with defensive, high-speed algorithms of their own, a Citigroup executive has claimed.
Stephen Shore of the Australian Financial Review reports that investment banks are starting to win the fight against “predatory HFT” firms that use speed to determine – and cash in on – arbitrage opportunities in other investors’ trades.
Citigroup’s global head of algorithmic products, Young Kang, told the Fin that Citi’s algorithms were saving clients 5 to 10 basis points per trade but were a defensive, rather than a predatory, play. Kang oversees a team of 70 traders and programmers around the world.
“We are in the space to provide value to our clients. Sometimes that requires us to be fast in execution on their behalf, but we’re not in it for arbitrate or gaming tactics … We try to prevent the short-term gaming that may take place or price points that may not be real,” he told the Fin.
High-frequency traders accounted for about 70 percent of US stock trading volumes in 2009 but only 51 percent as of last October.
The ASX hosts HFTs, investment banks and other firms that want high-speed access to its trade matching engines in a high-speed data centre in Sydney. High-frequency trading accounted for an estimated 15 to 20 percent of ASX equities trading as of August.
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