This is the championship of a report published past times the Bank of International Settlements (which serves key banks roughly the world) inwards September 2011. As a Forex trader myself, I of course peruse it amongst dandy involvement hoping to glimpse whatever is the state-of-the-art. Here are a few interesting nuggets, together amongst my commentary:
1) FX HFT travel amongst a latency of less than 1 ms, spell nearly of us mere algorithmic traders typically endure a latency of at to the lowest degree 10ms. For example, Interactive Brokers does non withal furnish collocation facilities for its customers, too then the best nosotros tin produce is to house our trading servers on the cyberspace backbone unopen to its Stamford, CT, location. The best round-trip ping fourth dimension is 10ms. Those who merchandise amongst FXCM may cause got a improve run a hazard for lower latency, equally they furnish free collocation to their clients. Those who merchandise on the ECN FXall tin collocate at their Equinix information center, spell FCM360 provides collocation service to EBS traders. I cannot honor whatsoever collocation service for Hotspot FX or Currenex. If you lot know of such services, or FX brokers who furnish collocation, produce exit a comment!
2) HFT typically travel inwards markets amongst high liquidity too depression volatility. The one-time is non surprising, since markets amongst depression liquidity has few counter-parties to accept payoff of. The latter requires a fleck of nuance. I retrieve nearly HFT would produce goodness from high volatility inwards a mean-reverting market, simply unfortunately high volatility is ordinarily correlated amongst marketplace inwards a gratuitous fall. So don't live on surprised if you lot honor that HFT-provided liquidity all of a abrupt disappears when the marketplace is inwards stress, though the BIS written report stated that they are equally good quick to re-enter the marketplace in 1 trial the turmoil is over.
3) As a corollary of 2), HFT to a greater extent than oft than non merchandise inwards the major currency pairs. But increasingly, NZD too MXN cause got drawn many automated too HF traders.
4) Almost past times definition, the bid/ask quotes placed past times HFT tend to remain on the mass for a really brusk time, measured inwards ms, unless forced past times the telephone commutation to rest longer. EBS too Reuters both has minimum quote life or minimum create amount ratio. One telephone commutation that does not have such minimums is Currenex, which is hence specially attractive to HF trading. Hence if you lot are non a HF player, too produce non wishing to live on taken payoff of by a HF player, live on wary of Currenex!
5) Two of the favourite categories of HFT strategies: triangle arbitrage too liquidity-redistribution (taking payoff of pricing discrepancies across dissimilar trading platforms.) Despite the bad reputation HFTers cause got been acquiring inwards the concluding few years, I retrieve they produce furnish a useful service to other algo traders similar myself via these ii strategies. It is a hassle to give-up the ghost on looking for a improve broker/prices for your strategy!
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