Who's Afraid of High-frequency Trading?
Lotus Capital Management LP of New York earlier this year realized that a competitor was beating it to a trade it had programed by exactly 3 microseconds, day after day. The loss meant Lotus was forfeiting about $1,000 in daily revenue on that particular trading strategy.
Lotus, a quantitative trading firm that uses high-frequency strategies, invested and tinkered, eventually shaving five microseconds from the router and two microseconds from the execution server.
“By just reading the tape you can see a lot of what the other guys are doing. You can see who is successful. So eventually everyone is operating more or less the same strategy,” said Louis Liu, the 37-year-old founder of Lotus.