High Frequency Trading on the Wane in Canada

As reported by Boyd Erman, Canadian stock markets may be entering a “new regime” as high frequency trading starts to show signs of shrinking its role in share trading, according to a new report from brokerage ITG Canada.

HFTs have been blamed for many ills in the market, from the flash crash to a general increase in trading costs for big institutions that have to trade against them. But there are signs that their influence may have peaked.ITG’s analysts point to indications such as a decline in the number of buy and sell orders that hit the markets just fractions of a second before disappearing, and a reduction in the blizzard of message traffic to stock markets.

“This quarter’s analysis of message traffic data reveals changes in trading behaviour that may signal the begginings of a new regime,” ITG’s analysts wrote. “Improvements in our metric for the quality of order flow, combined with a decline in fleeting orders points to a structural change amongst HFT participants.”

Why are HFTs backing away? Money.

Study author Doug Clark, a managing director at ITG, said that other markets are showing similar trends. That suggests that the business of high-frequency trading is so competitive that some players weren’t making money.

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