The Korea Times
amn_close.png
amn_bl.png
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
amn_bl.png
Business
  • Tech
  • Bio
  • Companies
amn_bl.png
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
amn_bl.png
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
amn_bl.png
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
amn_bl.png
Entertainment & Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
amn_bl.png
Sports
amn_bl.png
World
  • SCMP
  • Asia
amn_bl.png
Video
  • Korean Storytellers
  • POPKORN
  • Culture
  • People
  • News
amn_bl.png
Photos
  • Photo News
  • Darkroom
amn_NK.png amn_DR.png amn_LK.png amn_LE.png
  • bt_fb_on_2022.svgbt_fb_over_2022.svg
  • bt_twitter_on_2022.svgbt_twitter_over_2022.svg
  • bt_youtube_on_2022.svgbt_youtube_over_2022.svg
  • bt_instagram_on_2022.svgbt_instagram_over_2022.svg
The Korea Times
amn_close.png
amn_bl.png
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
amn_bl.png
Business
  • Tech
  • Bio
  • Companies
amn_bl.png
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
amn_bl.png
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
amn_bl.png
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
amn_bl.png
Entertainment & Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
amn_bl.png
Sports
amn_bl.png
World
  • SCMP
  • Asia
amn_bl.png
Video
  • Korean Storytellers
  • POPKORN
  • Culture
  • People
  • News
amn_bl.png
Photos
  • Photo News
  • Darkroom
amn_NK.png amn_DR.png amn_LK.png amn_LE.png
  • bt_fb_on_2022.svgbt_fb_over_2022.svg
  • bt_twitter_on_2022.svgbt_twitter_over_2022.svg
  • bt_youtube_on_2022.svgbt_youtube_over_2022.svg
  • bt_instagram_on_2022.svgbt_instagram_over_2022.svg
  • Login
  • Register
  • Login
  • Register
  • The Korea Times
  • search
  • all menu
  • Login
  • Subscribe
  • Photos
  • Video
  • World
  • Sports
  • Opinion
  • Entertainment & Art
  • Lifestyle
  • Finance
  • Business
  • National
  • North Korea
  • 1

    People attempt to cut surging heating costs with creative solutions

  • 3

    BLACKPINK sets 6 more Guinness records

  • 5

    TXT brings together 'pansori' and fairy tale in new song 'Sugar Rush Ride'

  • 7

    Cabinet ministries turn deaf ear to watchdog's advice on sexual minorities

  • 9

    Seoul to work with Hanoi to pursue peace on Korean peninsula

  • 11

    National pension anticipated to be fully drained in 2055: NPS

  • 13

    Superintendent of Seoul Education Office gets suspended jail term

  • 15

    Police to build disaster prediction system to prevent recurrence of Itaewon tragedy

  • 17

    Opposition leader Lee claims innocence in corruption probe

  • 19

    Wall Street climbs to hit best level in nearly eight weeks

  • 2

    Senior US general warns of possible looming war with China

  • 4

    Jang Keun-suk steps out of his comfort zone with 'The Bait'

  • 6

    ENA's new dating show to spotlight young adult's romance

  • 8

    Bad weather disrupts operation of Jeju airport again after 3 days

  • 10

    More Korean manufacturers enjoy Georgia's hospitality

  • 12

    Korea's rice consumption hits another low in 2022: data

  • 14

    SK E&S retains gov't support for Barossa gas project in Australia

  • 16

    12 websites still unavailable after Chinese cyberattacks

  • 18

    Indonesia celebrates 50th anniversary of diplomatic ties with Korea via virtual event

  • 20

    LGES to capitalize on US IRA, Tesla partnership to continue record earnings

Close scrollclosebutton

Close for 24 hours

Open
  • The Korea Times
  • search
  • all menu
  • Login
  • Subscribe
  • Photos
  • Video
  • World
  • Sports
  • Opinion
  • Entertainment & Art
  • Lifestyle
  • Finance
  • Business
  • National
  • North Korea
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
Sun, January 29, 2023 | 00:52
Fast trading: helps or hurts markets?
Posted : 2012-03-25 14:52
Updated : 2012-03-25 14:52
Print PreviewPrint Preview
Font Size UpFont Size Up
Font Size DownFont Size Down
  • facebook
  • twitter
  • kakaolink
  • whatsapp
  • reddit
  • mailto
  • link


Korean brokerage firms still nascent in speed trading

By Kang Ye-won

High frequency trading (HFT), algorithm-based trading done by specialized traders with supercomputers in microseconds, or one millionth of a second, has been widely practiced in the U.S., Europe and other Asian financial markets firms.
ALthough small in numbers, the HFT traders move a large volume of shares and they make up more than half of all trading in the U.S. and others.

However, out of several historical glitches, the flash crash on May 6, 2010 when stocks nosedived almost 10 percent in a few minutes, has ignited global regulators’ urge to supervise these ever-faster trading practices; but controversy remains on what benefits and harms they bring to the markets.

Defining HFT

The debate starts on how to define HFT. To focus on the techniques of the practice, traders and investors call it “a number of techniques to facilitate trading,” said Edgar Perez, author of the book “The Speed Traders.”

Investors claim that they’re just like other market makers who profit from the difference between what buyers and sellers offer or the so-called, bid-ask spread, thus providing liquidity to the markets.

A market maker is a firm that stands ready to buy and sell a particular stock at a publicly quoted price, according to the U.S. Securities and Exchange Commission.

“In principle, it’s excellent, having the active trading means liquidity and markets need it, it shouldn’t even be a discussion,” said James Rooney, chief executive of Market Force Company based in Seoul.



“However, because the algorithm is so complex, a one-in-a-million mistake can be destructive to the market,” Rooney said.

Since the March flash crash in 2010, two U.S. regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), tightened the monitoring system of the broker-dealers who are directly involved with the alternative trading system, a broader term for fast trading.

But the governing agencies have not been able to directly link HFT as the cause of the market crash.

“Markets have failed for hundreds of years, this is nothing new,” Rooney said.
“Technical problems can be fixed, it is mostly the emotional part; when people become too clever for their own good,” he said.

Goods and bads

Many studies including a report by the Korea Exchange indicated that HFT provides liquidity due to the volume of trades, which shrinks the spreads, and is beneficial to all investors. In other words, the increase of fast trading helped the fundamental function of the market, which is price discovery.

“It was the market structure that was the problem, not HFT per se, that caused the crisis,” said Kim Joon-seok, a research fellow at the Korea Capital Market Institute, referring to the March 2010 flash crash.

For instance, the problem with the circuit breakers, which were set to pause trading for a wildly irregular price swings, didn’t fully reflect the interconnectedness of various markets with different thresholds, Kim said.

But critics argue that these traders who are constantly sending and cancelling orders can manipulate the prices taking advantage of “slower” investors.

For example, exchanges pay rebates to the traders who respond to the offers first, and the HFT traders can easily collect those rebates using what’s called flash orders, which is to hold its order on certain exchange for up to half a second without matching a buyer and a seller.

Although the exchange fees are a small fraction of a penny, the HFT traders move millions of shares and easily earn a large sum of profits.

In Korea, high-frequency trading — if roughly defined as trading between 5,000 and 20,000 shares a day — takes about 10 to 40 percent of all option and future trades on KOSPI 200 index, Kim said.

But compared to other Asian leading markets including Japan, Hong Kong and Singapore, the market size and liquidity are still immature, he added.

“Korean brokerage firms still have not invested in the sophisticated trading technology and hardware infrastructure required to manage the increased transaction volume that comes with speed trading,” Perez said.

The Financial Services Commission’s proposal to the Financial Investment Services and Capital Markets Act last July would create the path for alternative trading systems in the country, he added.
Emailyewonkang@koreatimes.co.kr Article ListMore articles by this reporter
 
wooribank
Top 10 Stories
1People attempt to cut surging heating costs with creative solutions People attempt to cut surging heating costs with creative solutions
2Cabinet ministries turn deaf ear to watchdog's advice on sexual minorities Cabinet ministries turn deaf ear to watchdog's advice on sexual minorities
3Seoul to work with Hanoi to pursue peace on Korean peninsula Seoul to work with Hanoi to pursue peace on Korean peninsula
4More Korean manufacturers enjoy Georgia's hospitality More Korean manufacturers enjoy Georgia's hospitality
5Superintendent of Seoul Education Office gets suspended jail term Superintendent of Seoul Education Office gets suspended jail term
6SK E&S retains gov't support for Barossa gas project in Australia SK E&S retains gov't support for Barossa gas project in Australia
7Indonesia celebrates 50th anniversary of diplomatic ties with Korea via virtual event Indonesia celebrates 50th anniversary of diplomatic ties with Korea via virtual event
8LGES to capitalize on US IRA, Tesla partnership to continue record earnings LGES to capitalize on US IRA, Tesla partnership to continue record earnings
9KT&G aims to become global top-tier company KT&G aims to become global top-tier company
10Middle East 'sales diplomacy' picks up speed Middle East 'sales diplomacy' picks up speed
Top 5 Entertainment News
1BLACKPINK sets 6 more Guinness records BLACKPINK sets 6 more Guinness records
2Shunsuke Michieda overwhelmed by Korean fans' support for his coming-of-age film Shunsuke Michieda overwhelmed by Korean fans' support for his coming-of-age film
3Jang Keun-suk steps out of his comfort zone with 'The Bait' Jang Keun-suk steps out of his comfort zone with 'The Bait'
4Kim Hyun-joo says humanity is at heart of action film 'Jung_E' Kim Hyun-joo says humanity is at heart of action film 'Jung_E'
5TXT brings together 'pansori' and fairy tale in new song 'Sugar Rush Ride' TXT brings together 'pansori' and fairy tale in new song 'Sugar Rush Ride'
DARKROOM
  • Nepal plane crash

    Nepal plane crash

  • Brazil capital uprising

    Brazil capital uprising

  • Happy New Year 2023

    Happy New Year 2023

  • World Cup 2022 Final - Argentina vs France

    World Cup 2022 Final - Argentina vs France

  • World Cup 2022 France vs Morocco

    World Cup 2022 France vs Morocco

wooribank
CEO & Publisher : Oh Young-jin
Digital News Email : webmaster@koreatimes.co.kr
Tel : 02-724-2114
Online newspaper registration No : 서울,아52844
Date of registration : 2020.02.05
Masthead : The Korea Times
Copyright © koreatimes.co.kr. All rights reserved.
  • About Us
  • Introduction
  • History
  • Contact Us
  • Products & Services
  • Subscribe
  • E-paper
  • RSS Service
  • Content Sales
  • Site Map
  • Policy
  • Code of Ethics
  • Ombudsman
  • Privacy Statement
  • Terms of Service
  • Copyright Policy
  • Family Site
  • Hankook Ilbo
  • Dongwha Group