High frequency trading (HFT) volume in the U.S. equities market jumped from 53% earlier this year to 75% in the month of August.And now some people are blaming the speed traders for increased volatility.
“You can look at a VIX chart and that’s almost perfectly correlated to high-frequency trading volumes,” says the founder of Wedbush Securities.
High frequency traders are regularly too heavily criticised for exacerbating highs and lows in the market so take this latest Bloomberg report with a grain of salt but it does present some interesting data, for example:
- HFT was only 26% of the market in 2006, according to Tabb Group LLC
- HFT accounted for about 61% of trading in 2009, according to Tabb Group LLC
- Wedbush Securities, a trading firm, says HFT accounted for 53% of trading earlier in 2011
[HFT] firms have made up 75% of American equity volume in August. They have boosted trading in shares of Apple, Google, Bank of America, and Goldman Sachs since early July after reducing business the first half of 2011.
“We’re seeing a tremendous amount of high-frequency trading.”
“Their business is a trading business, and volatility creates far more opportunities. Some of their algorithms and automated systems are trading two, three or five times as many shares as they would have in a more normalized volatility environment.”
But other data we’ve seen in the past said the speed traders made up for more like 70% of trading at any given time.
And there’s going to be a lot of volatility in uncertain times with or without HFT.