European HFT Profits Halved Amid Regulation, Declining Volume

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Based on filings with the governments of the Netherlands and the U.K., profitability for the top dozen high frequency trading (HFT) firms across Europe fell by 46 percent in 2012.

European HFT Profits Halved Amid Regulation, Declining Volume

The biggest high frequency traders including, Citadel Securities, Jump Trading, Optiver, and Tower Research Capital, saw revenue declines of 26 percent as a whole, while industry veteran Getco reported an 81 percent decline in European profits. The landscape has shifted in Europe of late as Italy recently unveiled a tax aimed at HFT and Germany rolled out penalties to curb high frequency trading manipulation.

In addition, trading volumes have declined across the continent and in the United States rendering many strategies unprofitable. As such, HFT firms are all chasing smaller and smaller pieces of the market at an increasingly fast pace, leaving many to wonder if the algorithmic, speed-of-light trading has reached its endpoint.

Chris Malo, Sun Trading’s chief financial officer, said: “Regulation impacts both our net trading revenues and administrative expenses, as more management time is spent on compliance. Those firms that are not diversified will see greater volatility in their revenues and profitability.”

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