High Frequency Trading in Japan on the Uptick

By Nicole Hemsoth

August 23, 2010

High frequency trading (HFT), often called algorithmic or low latency trading, relies on fast computers and even faster networks to execute trades in sub-second and even sub-millisecond timeframes. It has generated massive profits for those firms skilled enough to handle the complexities of the software and hardware.

As such, it has become the dominant method for equity trading in the US, but it’s popularity is expanding worldwide, especially Asia. HPCwire got the opportunity to ask Chuck Chon, chief technology officer of SBI Japannext, about the HFT business in Japan and to talk about some of the technology behind it.

HPCwire: We’ve heard a lot about the prevalence of high frequency trading (HFT) in exchanges. Some analysts put the share of HFT trades at 70 percent. What’s the HFT landscape like in Japan?

Chuck Chon: I am using 2009 data. If we were to take the top 30 players out of the 107 TSE members total market share, it is around 84.2 percent. Out of these 30 players, there are 14 foreign brokerages houses and 4 mega-Japanese brokerage houses. If we were to add up the market shares of these 14 foreign brokerages and 4 Japanese mega-brokerage houses, we get 65.1 percent of the total market shares. We can safely assume that these 18 firms in Japan are engaged in some form of HFT type of proprietary trading strategies or have clients who actively trade using HFT strategies. Therefore, based on the assumptions that I have made, without going into further details, I would say it is perhaps over 50 percent already. The official TSE number for HFT trades is 30 percent in Japan.

HPCwire: What’s driving the high frequency trading market?

Chon: One of my former colleagues said to me, “If you do not have it — HFT — then you are the only one without it. So you need to have it just to compete.” Are they all profitable? I do not think so. I believe competition for an extra edge in the market is fierce and spreads are razor thin. HFT guys need to augment their profits by constantly trying to find the inefficiencies in the market. That includes alternative trading venues like SBI Japannext that can offer an extra edge through significantly smaller tick sizes compared to Tokyo Stock Exchange.

HPCwire: Can you describe what a typical HFT infrastructure looks like today?

Chon: I believe HFT infrastructures have gotten much simpler for a few simple reasons. First, collocation rack space cost is extremely high so the aim is to reduce the footprint in collocation rack spaces as much as possible. Second, they will eliminate any unnecessary hardware equipment and software applications that get in the way of latency. I guess a good analogy would be comparable to building a racing car.

HPCwire: What elements of the infrastructure are HFT firms focusing on to get a technological edge over their competition?

Chon: In HFT trading, fill ratio is a critically important parameter. The first to discover the inefficiencies in prices and the first to capture the inefficiencies obtains the edge in trading. HFT guys will go an extra mile to get there. Therefore, I believe their focus will evolve around latency busting technologies.

As an example, most likely all critical applications will be running in memory. If processes need to communicate outside the boxes, they will most likely opt for multicast instead of TCP. If they need to communicate via WAN link, they will most likely opt for low latency carriers and invest in high end network equipment to cut down on device latencies.

HPCwire: What does it currently take, money-wise, to get into the high frequency trading business? Is it just for big financial institutions with deep pockets?

Chon: My area of involvement for the past 20 years was exclusively around index arbitrage HFT trading strategies. Without going into too much detail, the fund size was in the billions of dollars and funding cost was near the LIBOR rate. The point here is that size matters in this business.

HPCwire: How do you see HFT systems evolving over the next several years? Will it be all about reducing latency or are there other areas that you think will become more critical?

Chon: As long as technologies continue to improve and even a micro second can be shaved, the hard core HFT guys will most likely go after it. I believe HFT systems will evolve until they achieve theoretical zero latency. As for the other critical area of development going forward, it may be in SOR technologies to effectively deal with proliferation of various types of liquidity pools and fragmentation of the market.

SBI Japannext, the largest and most well established alternative trading venue, was responsible for triggering the SOR race among the global brokerage houses in Japan. SOR has now become, “If you don’t have it — SOR — then you are the only one without it. So, you must have it in order to compete.”

HPCwire: A lot of criticism has been leveled at HFT — at least in the US. Some believe it can greatly magnify market volatility, creates unfair competition for traditional investors, and tips the balance of market activity from long-term investing to speculation. What’s your perspective?

Chon: I am sure there are others who are more qualified than I am in commenting on the effect that HFT has had on the market. From my perspective, the HFT business I was involved in, we got paid to provide the liquidity to market when the market needed liquidity and we got paid to take the liquidity when the market needed us to take the liquidity. We did it well and we did it abiding by the trading rules mandated by exchanges and compliance rules outlined by regulatory institutions. We took pride in assisting the market to become more efficient.

I believe HFT gets a bum rap because of its highly-proprietary nature of the business and lack of transparencies on how the strategies impact the market. I am quite certain if HFT existed during the 1920s, HFT guys would have gotten a bum rap for triggering the Great Depression. Having said that, if the critics of HFT were able to look under the hood of a typical HFT strategy, they may be surprised to find that it is perhaps based on some simple concepts — no different from what normal investors would do manually.

—–

Chuck Chon, CTO at SBI Japannext will be speaking at the Trading Architecture Asia 2010 conference, being held August 31st — September 2nd. HPCwire is a proud media partner of this event.

Subscribe to HPCwire's Weekly Update!

Be the most informed person in the room! Stay ahead of the tech trends with industy updates delivered to you every week!

Weekly Twitter Roundup (Jan. 12, 2017)

January 12, 2017

Here at HPCwire, we aim to keep the HPC community apprised of the most relevant and interesting news items that get tweeted throughout the week. Read more…

By Thomas Ayres

NSF Seeks Input on Cyberinfrastructure Advances Needed

January 12, 2017

In cased you missed it, the National Science Foundation posted a “Dear Colleague Letter” (DCL) late last week seeking input on needs for the next generation of cyberinfrastructure to support science and engineering. Read more…

By John Russell

NSF Approves Bridges Phase 2 Upgrade for Broader Research Use

January 12, 2017

The recently completed phase 2 upgrade of the Bridges supercomputer at the Pittsburgh Supercomputing Center (PSC) has been approved by the National Science Foundation (NSF) making it now available for research allocations to the national scientific community, according to an announcement posted this week on the XSEDE web site. Read more…

By John Russell

Clemson Software Optimizes Big Data Transfers

January 11, 2017

Data-intensive science is not a new phenomenon as the high-energy physics and astrophysics communities can certainly attest, but today more and more scientists are facing steep data and throughput challenges fueled by soaring data volumes and the demands of global-scale collaboration. Read more…

By Tiffany Trader

HPE Extreme Performance Solutions

Remote Visualization: An Integral Technology for Upstream Oil & Gas

As the exploration and production (E&P) of natural resources evolves into an even more complex and vital task, visualization technology has become integral for the upstream oil and gas industry. Read more…

For IBM/OpenPOWER: Success in 2017 = (Volume) Sales

January 11, 2017

To a large degree IBM and the OpenPOWER Foundation have done what they said they would – assembling a substantial and growing ecosystem and bringing Power-based products to market, all in about three years. Read more…

By John Russell

UberCloud Cites Progress in HPC Cloud Computing

January 10, 2017

200 HPC cloud experiments, 80 case studies, and a ton of hands-on experience gained, that’s the harvest of four years of UberCloud HPC Experiments. Read more…

By Wolfgang Gentzsch and Burak Yenier

A Conversation with Women in HPC Director Toni Collis

January 6, 2017

In this SC16 video interview, HPCwire Managing Editor Tiffany Trader sits down with Toni Collis, the director and founder of the Women in HPC (WHPC) network, to discuss the strides made since the organization’s debut in 2014. Read more…

By Tiffany Trader

FPGA-Based Genome Processor Bundles Storage

January 6, 2017

Bio-processor developer Edico Genome is collaborating with storage specialist Dell EMC to bundle computing and storage for analyzing gene-sequencing data. Read more…

By George Leopold

For IBM/OpenPOWER: Success in 2017 = (Volume) Sales

January 11, 2017

To a large degree IBM and the OpenPOWER Foundation have done what they said they would – assembling a substantial and growing ecosystem and bringing Power-based products to market, all in about three years. Read more…

By John Russell

UberCloud Cites Progress in HPC Cloud Computing

January 10, 2017

200 HPC cloud experiments, 80 case studies, and a ton of hands-on experience gained, that’s the harvest of four years of UberCloud HPC Experiments. Read more…

By Wolfgang Gentzsch and Burak Yenier

A Conversation with Women in HPC Director Toni Collis

January 6, 2017

In this SC16 video interview, HPCwire Managing Editor Tiffany Trader sits down with Toni Collis, the director and founder of the Women in HPC (WHPC) network, to discuss the strides made since the organization’s debut in 2014. Read more…

By Tiffany Trader

BioTeam’s Berman Charts 2017 HPC Trends in Life Sciences

January 4, 2017

Twenty years ago high performance computing was nearly absent from life sciences. Today it’s used throughout life sciences and biomedical research. Genomics and the data deluge from modern lab instruments are the main drivers, but so is the longer-term desire to perform predictive simulation in support of Precision Medicine (PM). There’s even a specialized life sciences supercomputer, ‘Anton’ from D.E. Shaw Research, and the Pittsburgh Supercomputing Center is standing up its second Anton 2 and actively soliciting project proposals. There’s a lot going on. Read more…

By John Russell

Fast Rewind: 2016 Was a Wild Ride for HPC

December 23, 2016

Some years quietly sneak by – 2016 not so much. It’s safe to say there are always forces reshaping the HPC landscape but this year’s bunch seemed like a noisy lot. Among the noisemakers: TaihuLight, DGX-1/Pascal, Dell EMC & HPE-SGI et al., KNL to market, OPA-IB chest thumping, Fujitsu-ARM, new U.S. President-elect, BREXIT, JR’s Intel Exit, Exascale (whatever that means now), NCSA@30, whither NSCI, Deep Learning mania, HPC identity crisis…You get the picture. Read more…

By John Russell

AWI Uses New Cray Cluster for Earth Sciences and Bioinformatics

December 22, 2016

The Alfred Wegener Institute, Helmholtz Centre for Polar and Marine Research (AWI), headquartered in Bremerhaven, Germany, is one of the country's premier research institutes within the Helmholtz Association of German Research Centres, and is an internationally respected center of expertise for polar and marine research. In November 2015, AWI awarded Cray a contract to install a cluster supercomputer that would help the institute accelerate time to discovery. Now the effort is starting to pay off. Read more…

By Linda Barney

Addison Snell: The ‘Wild West’ of HPC Disaggregation

December 16, 2016

We caught up with Addison Snell, CEO of HPC industry watcher Intersect360, at SC16 last month, and Snell had his expected, extensive list of insights into trends driving advanced-scale technology in both the commercial and research sectors. Read more…

By Doug Black

KNUPATH Hermosa-based Commercial Boards Expected in Q1 2017

December 15, 2016

Last June tech start-up KnuEdge emerged from stealth mode to begin spreading the word about its new processor and fabric technology that’s been roughly a decade in the making. Read more…

By John Russell

AWS Beats Azure to K80 General Availability

September 30, 2016

Amazon Web Services has seeded its cloud with Nvidia Tesla K80 GPUs to meet the growing demand for accelerated computing across an increasingly-diverse range of workloads. The P2 instance family is a welcome addition for compute- and data-focused users who were growing frustrated with the performance limitations of Amazon's G2 instances, which are backed by three-year-old Nvidia GRID K520 graphics cards. Read more…

By Tiffany Trader

US, China Vie for Supercomputing Supremacy

November 14, 2016

The 48th edition of the TOP500 list is fresh off the presses and while there is no new number one system, as previously teased by China, there are a number of notable entrants from the US and around the world and significant trends to report on. Read more…

By Tiffany Trader

Vectors: How the Old Became New Again in Supercomputing

September 26, 2016

Vector instructions, once a powerful performance innovation of supercomputing in the 1970s and 1980s became an obsolete technology in the 1990s. But like the mythical phoenix bird, vector instructions have arisen from the ashes. Here is the history of a technology that went from new to old then back to new. Read more…

By Lynd Stringer

Container App ‘Singularity’ Eases Scientific Computing

October 20, 2016

HPC container platform Singularity is just six months out from its 1.0 release but already is making inroads across the HPC research landscape. It's in use at Lawrence Berkeley National Laboratory (LBNL), where Singularity founder Gregory Kurtzer has worked in the High Performance Computing Services (HPCS) group for 16 years. Read more…

By Tiffany Trader

Dell EMC Engineers Strategy to Democratize HPC

September 29, 2016

The freshly minted Dell EMC division of Dell Technologies is on a mission to take HPC mainstream with a strategy that hinges on engineered solutions, beginning with a focus on three industry verticals: manufacturing, research and life sciences. "Unlike traditional HPC where everybody bought parts, assembled parts and ran the workloads and did iterative engineering, we want folks to focus on time to innovation and let us worry about the infrastructure," said Jim Ganthier, senior vice president, validated solutions organization at Dell EMC Converged Platforms Solution Division. Read more…

By Tiffany Trader

For IBM/OpenPOWER: Success in 2017 = (Volume) Sales

January 11, 2017

To a large degree IBM and the OpenPOWER Foundation have done what they said they would – assembling a substantial and growing ecosystem and bringing Power-based products to market, all in about three years. Read more…

By John Russell

Lighting up Aurora: Behind the Scenes at the Creation of the DOE’s Upcoming 200 Petaflops Supercomputer

December 1, 2016

In April 2015, U.S. Department of Energy Undersecretary Franklin Orr announced that Intel would be the prime contractor for Aurora: Read more…

By Jan Rowell

Enlisting Deep Learning in the War on Cancer

December 7, 2016

Sometime in Q2 2017 the first ‘results’ of the Joint Design of Advanced Computing Solutions for Cancer (JDACS4C) will become publicly available according to Rick Stevens. He leads one of three JDACS4C pilot projects pressing deep learning (DL) into service in the War on Cancer. Read more…

By John Russell

Leading Solution Providers

D-Wave SC16 Update: What’s Bo Ewald Saying These Days

November 18, 2016

Tucked in a back section of the SC16 exhibit hall, quantum computing pioneer D-Wave has been talking up its new 2000-qubit processor announced in September. Forget for a moment the criticism sometimes aimed at D-Wave. This small Canadian company has sold several machines including, for example, ones to Lockheed and NASA, and has worked with Google on mapping machine learning problems to quantum computing. In July Los Alamos National Laboratory took possession of a 1000-quibit D-Wave 2X system that LANL ordered a year ago around the time of SC15. Read more…

By John Russell

CPU Benchmarking: Haswell Versus POWER8

June 2, 2015

With OpenPOWER activity ramping up and IBM’s prominent role in the upcoming DOE machines Summit and Sierra, it’s a good time to look at how the IBM POWER CPU stacks up against the x86 Xeon Haswell CPU from Intel. Read more…

By Tiffany Trader

Nvidia Sees Bright Future for AI Supercomputing

November 23, 2016

Graphics chipmaker Nvidia made a strong showing at SC16 in Salt Lake City last week. Read more…

By Tiffany Trader

New Genomics Pipeline Combines AWS, Local HPC, and Supercomputing

September 22, 2016

Declining DNA sequencing costs and the rush to do whole genome sequencing (WGS) of large cohort populations – think 5000 subjects now, but many more thousands soon – presents a formidable computational challenge to researchers attempting to make sense of large cohort datasets. Read more…

By John Russell

Beyond von Neumann, Neuromorphic Computing Steadily Advances

March 21, 2016

Neuromorphic computing – brain inspired computing – has long been a tantalizing goal. The human brain does with around 20 watts what supercomputers do with megawatts. And power consumption isn’t the only difference. Fundamentally, brains ‘think differently’ than the von Neumann architecture-based computers. While neuromorphic computing progress has been intriguing, it has still not proven very practical. Read more…

By John Russell

The Exascale Computing Project Awards $39.8M to 22 Projects

September 7, 2016

The Department of Energy’s Exascale Computing Project (ECP) hit an important milestone today with the announcement of its first round of funding, moving the nation closer to its goal of reaching capable exascale computing by 2023. Read more…

By Tiffany Trader

Dell Knights Landing Machine Sets New STAC Records

November 2, 2016

The Securities Technology Analysis Center, commonly known as STAC, has released a new report characterizing the performance of the Knight Landing-based Dell PowerEdge C6320p server on the STAC-A2 benchmarking suite, widely used by the financial services industry to test and evaluate computing platforms. The Dell machine has set new records for both the baseline Greeks benchmark and the large Greeks benchmark. Read more…

By Tiffany Trader

Deep Learning Paves Way for Better Diagnostics

September 19, 2016

Stanford researchers are leveraging GPU-based machines in the Amazon EC2 cloud to run deep learning workloads with the goal of improving diagnostics for a chronic eye disease, called diabetic retinopathy. The disease is a complication of diabetes that can lead to blindness if blood sugar is poorly controlled. It affects about 45 percent of diabetics and 100 million people worldwide, many in developing nations. Read more…

By Tiffany Trader

  • arrow
  • Click Here for More Headlines
  • arrow
Share This