The high frequency trading is those subjects who return permanently in the news. Especially since the famous "flash crash" American when the Dow Jones lost and regained 600 points in twenty minutes. "La Tribune" decided to investigate this phenomenon that is revolutionizing the market.
"You know 24?"
Faced with a hangar-like regular of an industrial half-deserted New Jersey, Jayesh Punater jokes, making reference to the famous American suspense series. Here, 20 minutes from New York, Gravitas, the company he leads, has implemented its computer servers. He is not alone.
Behind these walls, hides a huge center data processing ("data center") operated by Equinix. Its slogan is, "Safety First," and these are not empty words! Access codes, scanners biometric surveillance cameras every two meters ... it's a fortress.
For the three gigantic halls the center house the technological infrastructure banks and hedge funds. Every day billions of dollars of transactions pass through these thousands of servers and the miles of fiber optic cables. With one goal: speed, time Brokerage high frequency high frequency trading. "Every microsecond counts, says Punater. “If you react after a microsecond someone else, it is too late. "
For ten years, brokerage entered in a race staggering. In the vast trading room London Nomura, a Japanese bank, to a row of computers that are just for control operations, Andrew Bowley, a specialist in electronic trading, cannot believe it himself. "In 1991, I automated machines working in 2.5 seconds. There are five years, was happy when we arrived at some tens of milliseconds. Today we talk in tens of microseconds. "In this race, after all to earn a few fractions of a second. The location of servers for example: major banks and hedge funds rent expensive locations inside data center of exchanges. This is called colocation. "It's calculated to the millimeter, so that everyone or at the same distance from the server " says Nicolas Bertrand, the specialist on the London Stock Exchange. Everyone is fighting also to control fiber networks optics. In June 2010, the company wiring Spread Networks has been a dedicated network brokering high frequency to the round trip between New York and Chicago 13.3 milliseconds. Save time? Two milliseconds compared to what existed before. It's enough to convince wealthy traders to pay to use this network.
Why this rush? Because than ever the notion of "time is money "was also true. The HFT is an investment strategy very short term is to buy and sell assets very quickly. Sometimes almost simultaneously in arbitrage transactions, The easiest way to win money with HFT: the computer compares for example the price of a single action between two exchanges, and can then easily play on the difference for the pocket. Everything is fully automated, and man is not involved time. "Each operation does not report a few cents, says Jonathan Brogaard, a professor at Northwestern University. But by increasing the tran- The easiest way to earn money the HFT? The computer compare the price of a same action between two exchanges, and can then easily play the difference the pocket. Operate, the best traders are able to make profits very strong. "At the heart of the system, there are now algorithms, processes, computer often complex and may require more than a year of development and testing. Must still arrive in time: a split second too late, and this strategy no longer works. "It's not just a race for speed, nuance Victor Lebreton, a director at As Hedge. It is also a race to acceptance: good price, good volume, the right market at the right time. "
Last year, the U.S., brokerage High frequency accounted or 53% volume of shares traded, more than twice in 2006. In 2009, this market share was even 61%, thanks to the extreme volatility that prevailed when markets open question, volatility which facilitated the games very short term. The consequences are dramatic: United States, the shares are held an average of 22 seconds before ... to be resold. In addition, it splits transactions, which are on average about 200 actions against 1600 there are five years. In Europe, where the phenomenon is more recent market share amounts to the HFT 38%. She was only 5% in 2006.
The increase in HFT seems inexorable : The strategy is spreading gradually Asia, including Hong Kong and Tokyo. But also in Mexico and Brazil. In South Africa, the Stock Exchange Johannesburg just bought the same technology used by its counterpart London. The stated objective is bluntly: "The transactions executed 400 times faster. "The extent of the HFT is also to other asset classes. After shares, brokers have studied that's about five years on the currency. "The HFT accounts for 25% of trade currency spot, "wrote in the December Bank for International Settlements. More recently, the practice has spread to raw materials like oil, gold, silver and metals. And brokers also wonder: some subjects agricultural commodities may be affected.
Inevitable, soaring HFT? And if, despite everything, this "arms race "Beginning to reach its limits? Computers banks have already been placed as close to stock exchanges, their power is always higher, and scheduling algorithms is by etching the chip directly. "The problem is that electricity cannot go faster: we arrive at limitations of speed of execution, "said Adam Vile, a specialist brokerage High Excelian frequency. False, however, responds Antoine Rescourio of Celoxica, a company that specializes in chips for HFT. "There are still a better filter Data returning from the exchanges. We could also put our chips on algorithmic trading, but the funds reluctant because of the confidentiality of their information. Ethernet networks the banks can also be improved ... "In short, there will always be some microseconds to win. "No, correct til. We'll get to the nanosecond. "It 0.000000001 seconds: a million times faster than a blink of an eye.
Eric Albert, London
Jerome Marin, in New York and Chicago