>>It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices.
It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.
Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense....
>>NYTimes Examines Low Latency Trading
July 24th, 2009 : Rich Miller
The New York Times has a front-page story this morning on low latency algorithmic trading by Wall Street firms, which the paper simplifies to ”high-frequency trading.” The story describes high-speed trading as a “mysterious force in the markets” with the power to “subtly manipulate share prices” that allows well-equipped firms to “reap billions at everyone else’s expense.”
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Others are weighing in on the Times’ piece. ClusterStock picks up on a post by John Hempton at Bronte Capital, which argues that high-frequency trading doesn’t explain the math behind Goldman Sachs’ trading profits. Hempton call the focus on low latency trading “the current conspiracy theory.”
Does this debate matter to the data center industry? Low latency trading has become a big business for a number of players in the data center space, especially Equinix (EQIX) and Savvis (SVVS). By “mainstreaming” the discussion about high-frequency trading, The New York Times article is likely to focus more scrutiny on the practice.
Will this be accompanied by a chilling effect on spending by trading firms, which would affect demand for colocation space and connectivity? It’s too early to say, but it bears monitoring going forward.
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