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The HFT
GrowthStory
Presented by Brian R BrownShogi Capital Group
Trading turnover in China could increase to more than $350 billion per day in a decade from the current $47 billion, Goldman Sachs estimates
Source: Bloomberg
Hong Kong$5.5 B
China$28.1 B
Japan$14.5 B
India$4.0 B
ASEAN$1.5 B
Korea$6.0 B
Australia$4.0 B
Taiwan$3.3 B
Average Equity Trades per Day
+266% volume growth since 2005
The Asia 'Micro' Story
2000 20102002 20082004 2006
Ave
rag
e D
aily
Vo
lum
e
Taiwan – Average Daily Volume
0
1
2
3
4
5
6
7
The Old Economy
Billions USD
Hedge Funds12%
Long Only87%
Retail1%
1998
Market Ecology
Hedge Funds12%
Long Only87%
Retail1%
1998 2008
Statistical Arbitrage
10%
Market-Neutral10%
Algorithms10%
Long Only20%
Hedge Funds20%
Retail2%
Automated Market Makers
15%
Market Ecology
Impact of Toronto Stock Exchanges (TSE) Electronic Liquidity Provider in Fall 2008
Source: Investment Technology Group (ITG), Sept 2009
Case Study:
• Bid-Ask Spreads decline -7.7%
• Tick Volatility declines by -11.2%
• Avg Quote Depth increases by 120%
• Vwap Performance quality increases by 1.2 bps
The Economic Impact
Source: NYSE Euronext
Predatory Trading
of all orders are cancelled97%
Asia Industry Outlook
• Infancy of a new industry of intermediaries – the Wal-Mart of finance
• Asia Marketplace evolving along a unique path
• Speed & Pace of today’s marketplace, influences perception of real economy
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