HFT - LTS Frequently Asked Questions
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.
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
Traders look to correlate prices between securities and currencies in some way and trade off the imbalances in those correlations.
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?
HFTs are mainly proprietary traders (own-account); HFT is usually not conducted on an agency basis (for-clients)
Segmentation of professional HFT Firm: proprietary trading firms (48%), proprietary trading desk of a multi-service broker-dealer (46%), or hedge funds (6%)
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.
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?
High-speed and sophisticated quantitative and algorithmic computer programs for generating, routing, and executing orders.
Very short time-frames for establishing and liquidating positions.
Very large number of trades generated on a daily basis, of which often > 80% are cancelled shortly after submission.
Ending the trading day flat (“delta-neutral”), i.e. without carrying significant, un-hedged positions over-night.
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.
Usage of co-location / proximity services to minimize latency.
Question: What is the impact of HFT Trading (Laser Trading) on Liquidity?
Often read argument: HFTs provide no real liquidity because they are constantly attempting to flatten their position.
Empirical evidence, however, suggests that……
HFTs reduces spreads
HFTs add substantial liquidity to the market
HFTs alleviate effects of market fragmentation.
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?
HFTs tend to follow a price reversal strategy, driven by order imbalances, and so tend to stabilize prices.
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).
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:
On the one hand, price discovery benefits from market participants who quickly detect anomalies in market prices and correct them.
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?
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.
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?
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.
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.
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.
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)?
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?
Answer : There are several options for depositing funds, including Bank Transfers, Cheque, Credit Card, Global Collect like Moneybookers, Western Union, Money Gram and Direct Deposit.
Question: How long will it take for funds to appear in my Live Account?
Answer: Funds clear overnight so should appear in your Live Account the following working day but can take up to 3-4 days. If funds are deposited on Friday it could take 3-4 working days starting from Monday as a working day.
Question: How do I withdraw funds?
Answer : Simply fill up the Withdrawal Request Form and send the scanned copy to Accounts Department once we receive the form we will send the confirmation in your mail and also the funds withdrawal source and time or you can do it through Online Withdrawal Request
Question: How do you calculate the value of a pip?
Answer : If to 4 decimal places, then use the following formula: (0.0001 / Spot Price) * Lot Size
Question: How do you calculate the margin per trade?
Answer : Overall Lot Size / Leverage Amount For example: 2 lots at 400:1 contract size for 2 lots will be 200,000 / 400 = 500 margin required
Question: Why does the demo only last 10 days?
Answer : The VertexFx and MetaTrader 4 demo are only a basic overview to show how the platform works. You can get on the free live platform by opening even a Micro account with investing just $200.
Question: Can I trade Micro & Mini lots?
Answer : Yes. You can trade as little as 0.01 lots (1,000 contract size) including currencies, metals, energy, commodities, grains and CFDs Futures as 0.1 lots (10,000 contract size)
Question: What is your leverage?
Answer : FX leverage through VertexFx is set to 100:1 as standard, but can be increased to 300:1 and even 500:1 upon request. If you would like to amend your leverage, please contact your account manager or mail us Customer Care.
Question: What currency is my account held in?
Answer : You can open an account either in EUR, GBP, or USD.
Question: Will I earn any interest for any funds deposited into my Live Account?
Answer : No, there is no interest charged on any fund deposited into your Live Account
Question: Can I log in to my account simultaneously on separate computers?
Answer : Yes, this is possible only if Axiom Traders provides multi secession trading platform.
Question: Can I log in to multiple accounts on the same computer?
Answer : Yes, through a multi-terminal facility.
Question: What are trading hours?
Answer : Sunday 22:05 GMT to Friday 22:00 GMT.
Question: How do I open a trading account?
Answer : Go to Open a Real Account fill in the form and you will receive an e-mail with your login details and instructions on how to download and start trading in our forex platforms which you have requested.
Question: How long does it take for Axiom Traders to set up the account?
Answer : Usually it takes 1 day to open the account and set up the parameters decided with the client, and in the same day within 24 hours you will receive a mail with all the required instruction.
Question: I don’t have a passport – can I open an account with another piece of identity?
Answer : Yes, any official piece of identification with photo and signature is acceptable by the compliance department of Axiom Traders.
Question: Do I need to provide you with proof of residency?
Answer : Yes. In order to validate your account completely so that you may withdraw funds, you must provide a recent utility bill (e.g. electricity, gas, water, phone, oil, Internet and/or cable TV connections) dated within the last 3 months confirming your registered address which must be in your name, or even the copy of the first page of your bank statement or cheque with your name print on it.
Question: Can I withdraw my money if I have an open position(s)?
Answer :Yes, you can. However at the moment of payment, your free margin must exceed the amount specified in the withdrawal instruction including all payment charges. Free margin is calculated as equity less necessary margin (required to maintain an open position). If you do not have sufficient free margin in your trading account we will not carry out the withdrawal request until you submit a corrected Withdrawal Request Form and/or close the open positions in your account.
Question: How long does it take for funds to reach my bank account?
Answer : It depends on the country the money is sent to. Standard bank wire within the EU, USA and UK takes 3 working days. Bank wires to some countries take up to 5 working days.
Question: Can I transfer funds from my trading account to the trading account of another client?
Answer : No, it is forbidden to transfer funds between different clients’ accounts and third parties, and this is to avoid any dispute in future among all and for the security reasons.
Question: Is it possible to open more than one account?
Answer : Yes, you can open several accounts.
Question: Will you close my real account if it has a zero account balance?
Answer : No, we will not. You can have a functioning real account with a zero account balance.
Question: What types of accounts does Axiom Traders offer?
Answer : Axiom Traders offers 15 types of accounts:
AxTr Standard AA
AxTr Standard Plus
AxTr Standard Account
AxTr MINI 01 Account
AxTr MICRO 001 Account
AxTr Option Trading Account
AxTr Auto Trader Account
AxTr Arbitrage Account
AxTr Hedging Account
AxTr CFDs Account
AxTr ECN Accounts
AxTr STP Accounts
AxTr PAMM Accounts
AxTr Managed Accounts
AxTr HFT Trading Accounts
Base currency is the first currency in the currency pair. For further details, please refer to the “Account Types” page.
Question: Can I change the time zone in VertexFx ?
Answer : No, the time zone of our trading servers is always GMT. Having times in GMT avoids having small candlesticks on Sundays and therefore allows the running of technical analysis and back testing to be more smooth and straight forward.
Question: When I go offline do you close my open positions and placed orders?
Answer : Open positions and pending orders stay in the system even if you log off from your trading platform.
Question: I cannot log in into my account but I need to close an open position, what must I do?
Answer : You may close (open, place an order) a position over the telephone 24 hours a day. Simply phone our dealing room or through chat SKYPE axiom-traders also you may place orders. You will be asked for your login for security reasons before your request can be executed. Please go to the Contact Us to get the further information.
Question: What are the differences between Demo and Real platforms?
Answer : While all features and functions of the real platform are available in the demo platform, users should keep in mind that simulation cannot replicate real trading market conditions. One important distinction is that the volume executed through the simulation does not affect the market; while in real trading volumes have effect on the market, especially when the deal size is large. Furthermore, users can have a very different psychological profile depending whether they trade in demo or real platforms. This aspect may impact the evaluation performed with the demo account. Users are advised to use caution and avoid complacency about any conclusion they would have drawn from the use of the demo platform.
Question: What is the maximum amount I can trade online?
Answer : There is no maximum amount you can trade online, however there is a maximum number of 10 standard lots you can trade online at streaming prices for Standard and Advanced accounts, 50 mini lots for Mini accounts and 500 micro lots for Micro accounts. If you wish to deal in an amount which is greater than your account type’s maximum lots, you may break your trade into smaller sizes. Clients can also trade larger amounts by phone.
Question: Can I deposit a small amount first to test your deposit/withdrawal processes but not get the bonus? Can the bonus applied to my second deposit?
Answer : We offer a 20% Welcome Bonus on your first deposit and 10% Loyalty bonus on every additional deposit and therefore you will be at all times receiving a bonus on every deposit you make.
Question: Why are you asking for documents for account validation?
Answer : As a registered company there are a number of compliance related matters and procedures that we must adhere by as imposed by our regulators. Such procedures include the collection of adequate documentation from our clients with regards to KYC (Know Your Client), which includes the collection of a valid ID card and a recent (within 6 months) utility bill which states the address the client has registered with.
Question: Is there a possibility to lose more money than my deposit?
Answer : No. You only stand to lose what you deposit. Should a scenario occur where the slippage of a certain currency pair takes your balance to a negative position, then rest assured that this will be promptly rectified by our back office department.