The A to Z of high frequency trading

The A to Z of high frequency trading

The A to Z of high frequency trading

The financial markets can be bewildering places for the uninitiated to get to grips with – and the fact that they enjoy their own vocabulary doesn’t help. Some of the terms are off-puttingly technical, while others have a certain descriptive poetry to them. Here’s our A-Z guide to some of the most common.

Arbitrage Seek out a stock that’s a fraction of a penny cheaper in one market than in another. Then buy low, sell high. Repeat.

Bats – One of the new generation of trading platforms. Bats suffered serious embarrassment earlier this year when its US trading platform was blamed for a mini flash crash affecting the flotation of its own shares.

Colocation – Allows traders to place their black boxes closer to exchanges’ own servers – for a price – shaving valuable microseconds off transaction times.

Related story – Britain opposes MEPs seeking ban on high-frequency trading

Dark pools – Trading venues for those wanting to buy or sell without tipping the rest of the market off. Dark pools, run by exchanges or brokers, allow anonymous trading and prices aren’t reported until later – making them increasingly popular for investors trying to hide from HFT firms.

Exchange – Market places for buying and selling shares. Since 2007, they have faced competition from new rival platforms, creating new spaces for HFTs to play, and from dark pools.

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About yocijourney

God does not play dice
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