High Frequency Trading: Looking to Asia for Succor?

by Anshuman Jaswal, PhD,  Muralidhar Dasar, September 14, 2011
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America


High frequency trading (HFT) is at a cross-roads. It has achieved harmonization and efficiency gains in leading global cash equity markets in the US and Europe, but the potential for further growth has been reduced. Falling volumes and volatility in these markets have decreased opportunities for profit. Furthermore, the overall profitability of HFT has been called into question.

In this report, High Frequency Trading: Looking to Asia for Succor?, Celent examines the profitabil- ity of HFT in conjunction with the growth of the Asian markets. The report also looks at the impact of increasing globalization and electronic trading on the development of cross-asset trading.

As technology evolves rapidly, it is possible for trading desks to deal more easily in multiple assets across global markets. Globalization has meant greater integration of economies worldwide, and this has been coupled with an increasing interest and participation of HFT players in the leading Asian markets. Although the US and Europe continue to lead in share of HFT in respective markets, it is clear that HFT is making significant progress in other geographies such as Japan, Australia, and Canada.

“The honeymoon period for HFT is over, and market participants are taking a long and hard look at the profitability and impact of HFT strategies,” says Anshuman Jaswal, Celent Senior Analyst and coauthor of the report. “However, this can be viewed as a period of consolidation, and we expect HFT to adapt and grow to meet the needs of the multiasset trading environment.”

“HFT’s slowdown in growth in the US and Europe is a possible result of the fact that a lot of the potential has already been achieved in these markets,” says Muralidhar Dasar, Celent Analyst and coauthor of thereport. “The Asian market is going to be at the forefront of HFT’s growth over the next few years, and this is something a number of the leading participants are gearing up for.”

This report looks at the evolution of HFT in the leading global markets over the last few years. It discusses the drivers of HFT and the various strategies adopted by HFT participants. The report also looks at recent changes in the US and European markets, where HFT seems to have fulfilled a lot of its potential. The important role of regulation is also studied for different markets, along with a special focus on the Asian market. Finally, the report analyzes the important trend of multiasset trading and its synergies with HFT.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary




Market Overview






Key Drivers



HFT Strategies



Fragmentation and HFT



Low Latency Is a Key Enabler



HFT Market Sizing


Declining HFT Profitability in the US and Europe



Regulatory Developments


Focus on Asia


Multiasset Trading and the Emergence of a Single Global Market




Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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