Research

The following is a selection of white papers written by the members of Area 11 Research.

Introduction to HFT Scalping Strategies

Basic HFT scalping originated as a simple spread capture strategy – lean on order book depth, post on the best bid/offer and flip to the other side – from the Chicago futures markets, spreading to the equities markets in the early 2000’s.

 

Locked Markets, Priority, and Why HFTs Have an Advantage -    Part I: Spam and Cancel

HFT is about being first in the queue, period. That is an HFT’s primary alpha. Rule 610 defines precisely the conditions in which an HFT can achieve a superior place in the queue.

 

Locked Markets, Priority, and Why HFTs Have an Advantage -    Part II: Hide and Light

As high-frequency trading (HFT) scalping strategies began employing “spam and cancel” strategies that dominated top-of-book trading activity,1 exchanges realized that they could generate vast amounts of orders/fees and began aligning their focus toward serving the needs of these “new market makers.”

 

 

Locked Markets, Priority, and Why HFTs Have an Advantage -    Part III: Intermarket Sweep Orders (ISOs)

While ISOs are meant for large institutions sweeping through the book, in practice they are really leveraged by HFTs and sophisticated proprietary trading desks to get ahead of slow Stock Information Provider (SIP) data feeds during price moves.

 

Locked Markets, Priority, and Why HFTs Have an Advantage -    Part IV: Winner Take All: The DAY ISO

This advantage – the remarkable ability to step ahead of orders resting on the book at the same price – gives DAY ISOs a unique edge over the bulk of order types, including orders that “hide and light.”

 

Providing Liquidity in a High-Frequency World: Trading Obligations and Privileges of Market Makers and a Private Right of Action

This article analyzes the reach of a private right of action under federal securities law for violations of trading obligations and abuses of trading privileges by market makers in today’’s rapidly evolving securities markets.