Speed Will Always Matter, Prop Trader Maintains
June 5, 2012
Milliseconds gave way to microseconds. Microseconds are giving way to nanoseconds. And Oleg Olovyannikov, the chief technology officer at Tudor Investment Corporation, says he’s now getting pitches for new products that confer picosecond advantages.
Is there life after speed of trading goes below a billionth of a second? Will a significant new form of stock market emerge, once the speed of a trade gets to near-zero?
The answer is no, says Chris Concannon, partner and executive vice president of Virtu Financial, a U.S.-based proprietary trading firm. "Everyone's spent too much on speed,’’ he said at the Market Tech 2012 forum of the Tabb Group Tuesday.
Market participants have spoken, at least in equities, he contends.
A case example: the Nasdaq PSX market, introduced in October 2010 as an alternative to speed-oriented markets.
At the time, Nasdaq OMX Group chief executive Robert Greifeld called the exchange’s intent to giving priority to the size of a trade over speed of placing it “a fundamental change to market structure.”
A year later, Nasdaq even said it would allow firms to stipulate a minimum quantity of shares that they are willing to trade.
But its “price-size exchange,” PSX, has achieved just a 1.3% share of market, according to BATS Global Market data.
By comparison, the Nasdaq Stock Market itself, which relies on price-time prioritization, has more than 18% of the market. And pretty much all other exchanges, as well, prioritize speed over size more than 18 months later.
