Alexandre CAMPOSAlexandre CAMPOSJuly 28, 2018
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6min1500

The human or animal side of trading rooms remained paramount in the trading world. Nowadays, IT and mathematics are omnipresent in the front office. In this war against time, some market players are increasingly denouncing a real “arms race”, making it impossible for small players to intervene and thus creating distortions of competition.

The Hight frequency trader or high frequency trading uses powerful computers including algorithms to select and operate minute market movements with an order of time close to one millisecond. We can have up to 1000 executions per second.

The aim being to take advantage of very small price differences on securities system values, it is a form of scalping. This form of trading, which has developed strongly in recent years, is generating a great deal of interest, as is the case for Goldman Sachs, which no longer has a trader in New York, but also a lot of questions for managers, investors and, above all, the AMF. Indeed, it is difficult for the AMF to establish this ratio because not all HF traders are market members and the AMF has direct access only to the identity of the market members responsible for orders and transactions, not end customers.

The debate is great around this apparent form of trading. Some believe that it provides liquidity via market-making and arbitrage as well as a certain market efficiency through a balance of prices between the market and related values.
Denouncers denounce a “ghost” liquidity, the permanent instability of the order book would introduce a structural uncertainty into trading (an order is already obsolete at the time it is sent) that is an obstacle to efficiency.

high frequency trading

Scheme : Source AMF

In addition, market authorities are starting to raise their voices. For example, the AMF recently reported a damning report on this type of trading, denouncing in particular the threats of “market integrity” when trading strategies are diverted from their original purpose and used for market manipulation purposes. 

We now note the appearance in recent years of a system similar to high frequency trading: Robots advisors.

From FinTech (Financial Technology), supported by the AMF and ACPR, it marks a break for individuals regarding their investments and advisors.

Note that robots are already well established in market finance as stated above. For market finance players, these robots are an undeniable reality taking full part in the digital era (BigData).

The banks have therefore opened this possibility to retail investors in order to retain unprofitable customers at a lower cost, attract new customers via an automated and fluidized delegation of transactions through these robots and their algorithms.

The possibilities are numerous for portfolio management, market definition and risk profile allow to let the robot free to process orders automatically. Who will then be held responsible for mismanagement, loss of capital or poor arbitration. The bank, the quant or the investor? of many questions remains present concerning these attractive robots, eager for profit but even more so most inefficient on fraudulent sites.

In short, robots allow financial players to trade at high frequency, allowing automatic execution on thousands of orders on a daily basis, but they require constant vigilance and highly qualified people in mathematics and IT to push the limits of finance a little further each day. This system was an opening to Fintech and a development of the banking and financial offer for individual investors through robots able to manage a portfolio of assets in purchase/sale in an algorithmic way.


Alexandre CAMPOSAlexandre CAMPOSNovember 28, 2017
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4min470

Everyone today knows about the existence of crypto-currencies mainly thanks to Bitcoins. This virtual phenomenon has given way to a large market for digital currencies, both in terms of market cap and existing number. In this article we will discuss the Ripple, the flagship currency of the moment (see ripple euro rates). The ripple project comes from the company RipplePay which appeared in 2004. This project focused on the creation of local currencies within different communities.

ripple

After the appearance of Bitcoin in 2012, a new company called Ripple labs was created, which was at the origin of the Ripple Token Issue (XRP). The first idea is to simplify international money transfers by relying on decentralized servers, by having a vision of clearing currency, not payment currency in order to facilitate transactions and make them less costly.

“The goal is to free oneself from what are called peers in the currency market. Instead of exchanging one US dollar for the euro, we will exchange one dollar for XRP and then switch from XRP to the euro,” explains Alexandre Stachtchenko, co-founder.

For individuals, the purchase of the Ripple is simply motivated by the speculative and liquid aspect of it, as they cannot use it on the Ripple network, so the intrinsic utility is nil.

The ripple has caused a strong craze in recent weeks, it appears to some as the replacement for the SWIFT system.

This strong demand from users/speculators has propelled the ripple as the second cryptomone (Capitalization about 145 billion dollars) after the bitcoin (see euro ripple price).

Its price remains around 3 dollars, the ripple to sight its price increase by 60 000% in one year.

Regarding the protocol used, the Ripple blockchain does not use minors to validate blocks of transactions via important calculations unlike Bitcoins or Etherreum. In the Ripple blockchain, all the tokens are already pre-mined (all of them are already created, but only about 40% are in circulation on the market, the others being blocked in a computer escrow) and the transactions are validated through a voting system.

However, this system raises some questions, the ideological domain, so it would be a cryptomonnaies that serves the banking systems. In addition, this fast system reveals lower security.

One last point seems important to me on the criticism, the fact that a large majority of ripples are owned by only a few people (Ripple Labs owns 60% and the two former CEO 20%) is a dependency problem.

“Beyond the fact that these people de facto control the market, imagine if in 20 years’ time the technology was used by all banks. The power these people would have over the global economy would be a serious problem,” said Alexander Stashchenko.

The other co-founder Chris Larsen became virtually the fifth richest man in the world on Thursday, January 4. With a valuation of his assets exceeding 59 billion dollars, he even doubles Facebook boss Mark Zuckerberg.

Chris Larsen holds XRP 5.19 billion (Ripple’s virtual currency) and 17% of the company’s shares. The XRP reached an all-time high of $3.82 while it was still trading at $0.25 in mid-December, an increase of 1.428% in three short weeks.



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