Question: What is HFT (Laser Trading)?

Answer:    It is the latest salvo in the “race to zero,” traders’ term for their efforts to whittle away the difference between the speed their orders travel at and the speed of light. Zero, the point at which that difference would disappear, has become a kind of holy grail to computerized traders, for whom nanoseconds--billionths of a second--can spell the difference between profit and loss in their algorithm-driven trades.

 

In recent years, so-called high-frequency trading firms, which account for about half of U.S. stock trading, have adopted first custom-built fiber-optic cables, then microwave and later millimetre-wave transmissions. Networks built on all three technologies operate today, tying together exchanges around the U.S. Internationally, fiber-optic cables laid across the oceans link America’s markets with Europe’s and Asia’s.

 

Now come lasers.

 

“This is a never-ending race,” said Michael Persico, founder and chief executive of Anova Technologies LLC, the company behind the plan to link the NYSE and Nasdaq data centers in New Jersey by laser.

 

Question: HFT Trading (Laser Trading) History?

Answer:    High-frequency trading (HFT) is the use of sophisticated technological tools and computer algorithms to rapidly trade securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second. Firms focused on HFT rely on advanced computer systems, the processing speed of their trades and their access to the market. Many high-frequency traders provide liquidity and price discovery to the markets through market-making and arbitrage trading; and high-frequency traders also take liquidity to manage risk or lock in profits.

 

As of 2009, studies suggested HFT firms accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012.

 

High-frequency traders move in and out of short-term positions aiming to capture sometimes just a fraction of a cent in profit on every trade. HFT firms do not employ significant leverage, accumulate positions or hold their portfolios overnight;  they typically compete against other HFTs, rather than long-term investors. As a result, HFT has a potential Sharpe ratio (a measure of risk and reward) thousands of times higher than traditional buy-and-hold strategies.

 

HFT may cause new types of serious risks to the financial system. Algorithmic and HFT were both found to have contributed to volatility in the May 6, 2010 Flash Crash, when high-frequency liquidity providers rapidly withdrew from the market. Several European countries have proposed curtailing or banning HFT due to concerns about volatility. Other complaints against HFT include the argument that some HFT firms scrape profits from investors when index funds re balance their portfolios.

 

Most retirement savings, such as private pension funds or 401(k) and individual retirement accounts in the US, are invested in mutual funds, the most popular of which are index funds which must periodically "re-balance" or adjust their portfolio to match the new prices and market capitalization of the underlying securities in the stock or other index that they track. This allows algorithmic traders (80% of the trades of whom involve the top 20% most popular securities to anticipate and trade ahead of stock price movements caused by mutual fund re-balancing, making a profit on advance knowledge of the large institutional block orders. This results in profits transferred from investors to algorithmic traders, estimated to be at least 21 to 28 basis points annually for S&P 500 index funds, and at least 38 to 77 basis points per year for Russell 2000 funds. John Montgomery of Bridge-way Capital Management says that the resulting "poor investor returns" from trading ahead of mutual funds is "the elephant in the room" that "shockingly, people are not talking about." The largest high-frequency trading firms in the US include names like Getco LLC, Knight Capital Group, Jump Trading, and Citadel LLC.

 

Advanced computerized trading platforms and market gateways are becoming standard tools of most types of traders, including high-frequency traders. Broker-dealers now compete on routing order flow directly, in the fastest and most efficient manner, to the line handler where it undergoes a strict set of Risk Filters before hitting the execution venue(s). Ultra Low Latency Direct Market Access (ULLDMA) is a hot topic among Brokers and Technology vendors such as Goldman Sachs, Credit Suisse, and UBS. Typically, ULLDMA systems can currently handle high amounts of volume and boast round-trip order execution speeds (from hitting "transmit order" to receiving an acknowledgement) of 10 milliseconds or less.

 

Such performance is achieved with the use of hardware acceleration or even full-hardware processing of incoming market data, in association with high-speed communication protocols, such as 10 Gigabit Ethernet or PCI Express. More specifically, some companies provide full-hardware appliances based on FPGA technology to obtain sub-microsecond end-to-end market data processing.

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Question: What Services does Axiom Traders provide for HFT Trading (Laser Trading) and how it works?

Answer   : Axiom Traders has developed its own HFT and Laser Trading Technology based on 'Master Account' and 'Slave Account'. Our system provides Back End System with the Liquidity Providers. The Feed Manager Server through the Gateway gathers the liquidity (feeds) from different liquidity provider and through our LTT (Laser Trading Technology) Axiom Traders will deliver those feeds into Master Accouny Server (MT4 Broker) and Slave Account Server (MT4 Broker) as shown in the below picture.

 

The system then take the BEST BID or BEST ASK from either of the MT4 brokers and opens one side in the Slave Account and closes the open position into the Slave Account after taking the liquidation price from the Master Account.​

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question: What are HFT Trading (Laser Trading) strategies and how it works?

Answer   : Electronic Market Making

 

Liquidity-Providing Strategies that mimic the traditional role market makers once played. These strategies involve making a two-sided market aiming at profiting by earning the bid-ask spread. This has evolved into what is known as Passive Rebate Arbitrage

 

Statistical Arbitrage

 

Traders look to correlate prices between securities and currencies in some way and trade off the imbalances in those correlations.

 

Liquidity Detection

 

Traders look to decipher whether there are large orders existing in a matching engine by sending out small orders (“pinging”) to look for where large orders might be resting. When a small order is filled quickly, there is likely to be a large order behind it.

 

 

Question: Who are the Players and how do they earn money?

 Answer    : 

1. HFTs are mainly proprietary traders (own-account); HFT is usually not conducted on an agency basis (for-clients)

2. Segmentation of professional HFT Firm: proprietary trading firms (48%), proprietary trading desk of a multi-service broker-dealer (46%), or hedge funds (6%)

3. All asset classes involved, extending from equities and derivatives into currencies and fixed income. Volume of HFT: No consistent figures on the size of HFT available (Estimations: 60-70% trading US trading volume and 40% in Europe.

4. Prominent Players: Proprietary trading firms Getco, Optiver or Tradebot, hedge funds Citadel or Renaissance Technologies, and trading desks within multi-service market participants, e.g. at Goldman Sachs or Citigroup

 

 

Question: What are the steps HFT (Laser Trading) works?

Answer    : 

1. High-speed and sophisticated quantitative and algorithmic computer programs for generating, routing, and executing orders.

2. Real-Time Data.

3. Very short time-frames for establishing and liquidating positions.

4. Very large number of trades generated on a daily basis, of which often > 80% are cancelled shortly after submission.

5. Ending the trading day flat (“delta-neutral”), i.e. without carrying significant, un-hedged positions over-night.

6. Speed matters in the absolute sense of achieving very small latencies, but even more so in the relative sense of being faster than competitors, even if only by a microsecond.

7. Usage of co-location / proximity services to minimize latency.

 

 

Question: What is the impact of HFT Trading (Laser Trading) on Liquidity?

Answer    : 

1. Often read argument: HFTs provide no real liquidity because they are constantly attempting to flatten their position.

2. Empirical evidence, however, suggests that……

   • HFTs reduces spreads

   • HFTs add substantial liquidity to the market

   • HFTs alleviate effects of market fragmentation.

3. From the academic side, there is no proof for a negative liquidity impact, but some issues still remain.....

   • No market making obligation: HFTs are not obliged to provide liquidity.

   • Size of Quotes: HFTs do not contribute to market depth.

   • Accessibility: HFTs quotes may be added and cancelled in milliseconds

 

 

Question: What is the impact of HFT Trading (Laser Trading) on Price Discovery Process?

Answer: 

1. HFTs tend to follow a price reversal strategy, driven by order imbalances, and so tend to stabilize prices.

2. HFTs provide the best bid and offer quotes for a significant portion of the HFTs provide the best bid and offer quotes for a significant portion of the trading day (but only around a quarter of the book depth).

3. Algorithmic traders’ quotes play a larger role in the price formation process than human quotes.

 

NO PROOF FOR A NEGATIVE IMPACT ON THE PRICE DISCOVERY PROCESS:

 

1. On the one hand, price discovery benefits from market participants who quickly detect anomalies in market prices and correct them.

2. On the other hand, HFT may also be distorting price formation if it creates an incentive for natural liquidity to shift into dark pools as a way of avoiding transacting with ever-decreasing order sizes. But: no documented empirical      evidence so far to support the possibility of this distortion.

 

 

Question: How to start HFT Trading (Laser Trading) with Axiom Traders?

Answer    :

1. Axiom Traders offers the HFT solutions to its clients in a very simple way. We will guide you to open you Live Account with world's best Liquidity Provider Exchanges, Clearing Houses, ECN Brokers, DMA Brokers.

2. Axiom Traders will provide the Account Holder the ‘HFT Trading System’ and will configure the Account Holder’s account with Third Party Broker’s client terminal MT4 or VertexFX providing the gateway with different Liquidity Providers, Market Makers, Banks and Exchanges with the Client’s API (Application Programming Interface) and connectivity with the ‘Feed Manager Server’ and the ‘Back End Systems’.

 

 

Question: How to open account with the third party brokers?

Answer:

1. You will open your online trading account with the Third Party Broker himself following the Third Party Broker account opening procedures. After opening the online trading account will provide to the Axiom Traders technical team the      Username, Password and all other Log-in instructions via email at Dealing Desk.

2. You will deposit the funds with the Third Party Broker as per the instructions of Third Party Broker, the policies for the withdrawal and deposits will be followed as per decided by you and Third Party Broker themselves. Axiom Traders will have no authority for the deposits and withdrawals from or to the your account in any circumstances.

3. This Power of Attorney shall remain valid towards Axiom Traders until revoked in written by the you. This Power of Attorney shall not expire upon the death, bankruptcy or the loss of legal capacity of the Account Holder or Axiom Traders, to get the copy of the Power of Attorney please mail us as  Customer Care.

4. You after signing the power of attorney should be aware that a difference between the exchange rate offered to the customer and that which Third Party Broker can obtain, may be accepted by the Axiom Traders as a premium if agreed and decided by the Third Party Broker and the Axiom Traders.

 

 

Question: System Required for HFT Trading (Laser Trading)?

Answer:

• Windows 2000 / XP / Vista / Windows 7

• 2.0 GHz or faster CPU

• 512 MB RAM (1 GB recommended)

• Screen resolution 1024x768 or higher

• Modem/connection speed 36.6 Kbps or faster

• Internet Explorer version 7.0 or later

• Mozilla FireFox 2.0 or later

 

Not Supported OS: MAC, Unix, and non-windows OS.

 

 

Question: Where is my money held?

 Answer   : Funds are deposited into a client segregated accounts in the name of the clients themselves, there are no ATM Cards or Cheque Books of such accounts and no one could withdraw the funds accept the client himself after filling the withdrawal form and submitting it to Axiom Traders Accounts Department at Accounts Department.

 

 

Question: What time is Axiom Traders Live Chat Available?

 Answer    : Axiom Traders Live Chat is available 5/24 starting from Monday 00:00 Hrs to Saturday 02:15 Hrs +4GMT 

 

Question: What are your platform trading hours? 

Answer    : 5/24 starting from Monday 00:00 Hrs to Saturday 02:15 Hrs +4GMT (one hour increases in winter timings)

 

Question: How do I deposit funds?