Bernhard Langer is not a fan of high frequency trading (HFT) despite being the Chief Investment Officer at Invesco Global Quantitative Equity.
Currently he manages $20bn of client money in world-wide equities. From that standpoint, he claims both the structure and infrastructure of share markets has “changed fundamentally” during his 23 years of trading, especially in the last 5 years.
Key points from Mr. Langer:
• Policy makers have loosened central stock exchanges’ stranglehold on trading and associated revenues, with regulations such as Mifid exploding the number of venues investors can use to buy and sell shares.
• Banks are using their own internal ‘crossing systems’ while dark pools seep up more and more often.
• Fund managers have been challenged by this liquidity fragmentation because institutional-sized trades don’t work as well in smaller markets.
• Invesco estimates up to 70% of US … 40-50% of European … and 20% of Asian equity trading volume now takes place outside traditional investment processes.
However, Langer is critical of claims that high frequency traders bring the liquidity he needs to markets. He doesn’t give a reason, however. Possibly because he needs such large positions that HFT can’t keep up with his institutional needs. There’s also the fact that some HFT firms aren’t interested in providing genuine liquidity and instead play manipulative games.
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