Thomson Reuters recently announced the launch of a news service boasting microsecond delivery of economic data to high frequency traders in London and Chicago. What’s a few microseconds here or there, you ask? A lifetime to traders.
“Being first to act on this information can dramatically affect a
firm’s profit and loss,” Rich Brown, global business manager of machine
readable news at Thomson Reuters, said in a press release. And he’s not
kidding–the Wall Street Journal recently reported that a difference of
just 300 microseconds (one microsecond is one-millionth of a second)
could affect the impact of a trade, and even a single microsecond has a
calculable cost. The new service, called NewsScope Direct, allows firms operating in the foreign exchange and futures markets to quickly respond to news before the information moves the market.
We’ve been hearing a lot about high-frequency trading lately, as it now accounts for 60% of total U.S. equity volume, according to The New York Times. It’s made trading cheap and easy, but has inspired concern about the integrity of the U.S. market.
High-frequency systems are faster (and smarter, as a result), than human traders–other investors can’t keep up. NYSE Euronext announced earlier this month that its system can execute orders in as little as 650 microseconds. For BATS Global Markets, that number is just 250 microseconds.
This all amounts to tough luck for individual investors. Score one for the robots.