By the memes of financial journalism, high-frequency trading is a “lucrative” practice, which involves scraping billions and billions of pennies into nice-sized piles of dollars.
Now comes some new research that suggests those piles aren’t as big as many had thought.
University of Pennsylvania researchers Michael Kearns, Alex Kulesza and Yuriy Nevmyvaka recently ran HFT simulations of their own, with an eye toward the overall profitability of the trading practice.
They did this by assuming that every trade was a winning one–the “Omniscient Trader Methodology,” as they call it.Hmmm...Omniscient Trader... I wonder if I can still trademark it.
Their final estimate–which they consider an almost cartoonishly large estimate–was $21 billion for the “entire universe of U.S. equities in 2008 at the longest holding periods.” Against an overall trading volume of roughly $50 trillion, the final numbers are pretty meek, they conclude....MORE
"Here at Omniscient Trader we believe..."
