HFT Firm Seeks Seed Capital For Hedge Fund Launch

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Maven Securities, a London-based high frequency trading firm, is looking to “spin out a number of strategies into a hedge fund given the right seed investor,” according to a report in Financial News.

While many HFT firms keep their profits a closely guarded secret, Maven reported a pre-tax profit of  £7.8 million in its first year of operation, according to the report.  Maven primarily trades in European stock and derivatives markets.

Market maker or HFT firm?

Maven walks a fine line, as they categorize themselves as both a market maker and an HFT firm.  Traditionally market making has been defined as continually making a simultaneous equal market on both the buy and sell side, profiting from the spread differential between the buy and sell price as well as receiving exchange rebates. HFT, on the other hand, is known to make orders in one direction and profits by being correct on their trade’s directional prediction.  Both market making and HFT are done using super-fast computers and exchange connections.

Uncertain compliance landscape going forward

HFT firms have traditionally not received significant institutional allocations due to the uncertainty of a changing regulatory landscape.  Not only might regulators impose additional restrictions on the activity, but the algorithmic traders who tend to receive institutional allocations tend to utilize a longer term time horizon for their trading strategies and have their results independently audited.

“As with all proprietary trading firms facing such a dynamic regulatory landscape we are looking to further complement our compliance and risk functions with key hires,” Ben Hunda, the firm’s founder, said in the report.  The report noted that Maven was founded in February 2011 by former cash and Delta One trader at Tibra and Macquarie Capital Huda, as well as former trader at Optive ; Ivan Koedjikov and Ian Toon, who has traded for both Optiver and Tibra Capital. Optiver is a Dutch high-frequency trading firm while Tibra is part of an Australian group founded by Danny Bhandari.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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