Emerging Market High Frequency Trading

The Economist writes about high frequency trading coming to Emerging Markets, such as the Bovespa. These trading strategies may improve market efficiency by adding liquidity in the very short term.

THE merits of high-frequency trading (HFT) are under scrutiny in America, thanks to the “flash crash” of May 6th when the Dow Jones Industrial Average plunged by nearly 1,000 points in a matter of minutes. But high-speed traders are getting a warm welcome in emerging markets. When BM&FBovespa, Brazil’s main exchange, offered firms “co-location” slots to place their trading machines in the exchange’s data centre in February (giving them an additional edge on speed), they quickly sold out. The exchange plans to double the number of slots to meet demand. On Singapore’s exchange, the share of derivatives trades accounted for by HFT has risen from 10% to 30% in two years.

Published by Janar Wasito

Janar Wasito is the manager of Magis Capital in San Diego, CA. He is a graduate of Harvard and Stanford Law School, and a former Marine Officer.

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