While the polarised debate surrounding high-frequency trading continues apace, the world’s HFTs are getting on with their daily business and are quietly being forced to adapt and evolve.
Some of this change is being driven by technology. Speed or latency continues to improve, but few HFTs are choosing to exclusively base their business models on the need for speed alone. With increased regulatory scrutiny on the matter, most recognise that is an unwinnable and inefficient way to allocate their hard-earned investment dollars.
This technological arms race is seemingly coming to an end. Speed will continue to be important, but alpha is more important for longevity. Instead, driven by falling volumes in 2012, HFT firms are searching out new growth opportunities.