Academy
  • Log in
  • Sign up
  • StockWatch
  • Lobby
  • Academy
  • Investing
    • Planning Your Investments Setting investment goals
    • 8 Steps to Financial Freedom
    • How to Get Out of Debt
    • Dollar Cost Averaging with Example Calculations
    • Which Credit Card Should I Get?
    • Can I Retire on 1 Million Dollars? Is it Enough?
    • Investment Vehicles Best way to invest your money?
    • How to Budget Your Money
    • Choosing a Finance Advisor
    • Asset Classes: Shares, property, fixed interest
    • The Magic of Compound Interest
  • Shares
    • Stock Market Investing and Share Market Tips
    • Short Selling Explained: What is Short Selling
    • How to Trade Like a Professional Trader
    • What are E Minis Futures? How do I Trade Them?
    • Diversification Learn how to diversify your portfolio
    • What Is Ethical Investing?
    • Creating a Trading Plan
    • The S&P/ASX 200 Index (XJO)
    • Choosing A Broker
    • Guard Your Portfolio With Defensive Stocks
    • How Much Do I Need To Invest In Shares
    • Investing VS Trading
    • What does ex dividend mean? How to ensure you receive your dividends
    • If I Could Only Invest In One Thing...
    • What Are Shares Dividends?
    • Dividend Imputation System & Franking Credits Explained Calculations
    • What is the 'Market'?
    • What Shares Should I Buy?
    • How to Buy Shares, placing an order
    • Building a Investment Portfolio Strategy
    • Trading the ASX 200 Index: ETFs, CFDs, Futures and Options
    • Creating a Trading System
    • Understanding the Share Language & Jargon of the Share Market
    • What are Income Stocks? Best Income Stocks for 2010
    • How To Pick Growth Stocks?
    • Wesfarmers (WES) vs Woolworths (WOW)
    • David Jones (DJS) VS Myer (MYR)
    • Benefits of Investing in Shares
    • How to Make Money In Shares
    • How to Treat Trading Like a Business
    • BHP vs RIO
    • Making Money In a Bear Market
    • Investing in Cloud Computing Stocks
    • High Dividend Stocks
    • Make Money Trading the Share Market
    • ANZ vs CBA vs NAB vs WBC
  • Funds
    • Managed Funds Choosing the best fund for you
    • S&P/ASX 200 ETFs: STW, IOZ, VAS
    • Managed Funds or Direct Shares
    • ETFs (Exchange Traded Funds)
    • Introduction to Index Funds
    • ETF Trading
  • Fundamental Analysis
    • Fundamental Analysis of Stocks: Qualitative Factors of the Company
    • Fundamental Analysis of Stocks: Qualitative Factors of the Industry
    • Fundamental Analysis: Quantitative Factors, Book and Price to Book Ratio
    • Fundamental Analysis: Quantitative Factors, Earnings Per Share (EPS)
    • Fundamental Analysis: Quantitative Factors, Price to Earning (P/E) and PEG
    • Fundamental Analysis: Quantitative Factors, Short Interest
    • Warren Buffett: A genius investor, a philanthropist, and a role model for citizens
    • Benjamin Graham: Father of value investing
    • Phillip Fisher
    • Peter Lynch
  • Technical Analysis
    • Charting
      • Technical Analysis: Charting: Line Chart
      • Technical Analysis: Charting: Bar Chart
      • Technical Analysis: How to Read a Candlestick Chart
      • Technical Analysis: How to Read Point and Figure Charts
      • Technical Analysis: How to Draw Trend Lines On A Stock Chart
      • Technical Analysis: What are Stock Gaps & How to Trade Them
      • Technical Analysis: How to Read & Trade Chart Patterns
    • Technical Analysis: The Secret of Moving Averages Explained
    • Learn How To Trade Support and Resistance Levels
    • Technical Analysis Indicators: Leading versus Lagging Indicators
    • Trend Following Indicators Part 1: What Is a Trend?
    • Trend Following Indicators Part 2: Trading The Average Directional Index (ADX)
    • Trend Following Indicators Part 3: The Directional Movement Index (DMI)
    • MACD Indicator Explained
    • Technical Analysis Momentum Indicators: ROC, Stochastic & RSI
    • The Relative Strength Index RSI Indicator Explained
    • Stochastic Indicator Explained
    • Momentum Following Indicators: The TRIX Indicator
    • Volume Following Indicators In Technical Analysis
    • Volume Indicators: On Balanced Volume (OBV) Indicator
    • Volume Indicators: Money Flow Index (MFI) Indicator Explained
    • Volume Following Indicators: Percentage Volume Oscillator (PVO) Indicator
    • Technical Analysis: Parabolic Stop and Reversal (PSAR) Indicator
    • Technical Analysis: Stop Loss & Trailing Stop Loss Orders
  • Commodities
    • Should I Invest in Gold? Pros and Cons of Precious Metal Investing
    • Should I Buy Gold Now?
    • Investing In Silver 7 Methods to Gain Exposure to Silver
  • Day Trading
    • Common Day Trading Myths and Lies Debunked
    • Day Trading Rules Part 1: Setup Long
    • Day Trading Rules Part 2: Setup Short
    • Buying and Selling With the Trend
    • Day Trading: The Art of Controlling Your Emotions Part 1
    • Day Trading: The Art of Controlling Your Emotions Part 2
    • Intermediate Setups and Creating a Bias Part 1
    • Intermediate Setups and Creating a Bias Part 2
    • The Art of Channel Trading
    • Day Trading Example: Walking Through a Trade – Part 1
    • Day Trading Example: Walking Through a Trade – Part 2
    • Can I Make Money Day Trading? How to Become a Day Trader?
    • Tracking the Market and Day Trading Your Stock
    • High Frequency Trading
    • What is a Trading Robot? Should I Use One to Trade?
  • Forex
    • How to Trade FOREX – Beginners Guide
    • Trading Forex
  • Derivatives
    • Options
      • Options Trading: Call Options Explained
      • Options Trading: Put Options Explained
      • Options Trading: Why Trade Options?
      • Components of an Option
      • Understanding Option Pricing Fundamentals
      • Options Trading Examples
      • Options Trading Strategies
      • Options Trading Risks
      • The Covered Call Strategy
      • Trading Options Seminars: What You Will Learn in a Teaser Seminar
    • CFDs
      • What are CFD's? Why Trade them?
      • CFD Types: Direct Market Access (DMA) VS Market Maker (MM) The Pros & Cons
      • CFD Margin Requirements Initial and Variation Margin.
      • CFD Trading: Calculating Overnight Interest Payments (Financing fees) with example
      • CFD Trading: CFD real life examples with calculations (Long & short)
      • The Pros & Cons of Trading CFDs
      • CFD Trading Risks: Learn the risks associated with trading CFDs
      • How to Choose the Best CFD Provider for You
      • CFD Trading Top 5 Trading Mistakes
      • CFD Tax Treatment
      • Learn How To Trade CFDs: Developing a system that should make us money
      • CFD Trading Example Flight Centre (FLT)

High Frequency Trading

  1. Articles
  2. Day Trading
  3. High Frequency Trading
17 December 2011
ยท
3 min read

Australia is now getting what many parts of the world are already doing – high frequency trading. What does this mean for the ASX marketplace and how might it affect the way you trade?

High Frequency Trading in Australia

High frequency trading (HFT) is a new type of trading taking the world by storm. It involves using computer algorithms and programs to make automated trades in the market. A typical HFT lasts a very short period of time which can be counted in the micro- or milliseconds. Hundreds or even thousands of small trades add up over a day to create profit. Estimates vary but some see the volume traded by high-frequency trades as making up 50 – 80% of the market.

Of course, to be competitive with this type of trading you would need incredibly low trading fees and low-latency data. If costs per transaction were high or there was a big delay between when you hit the buy button and when shares were actually purchased, this would render this strategy impotent.

This is where Chi-X and PureMatch come into play.

ASX Trading Platform: PureMatch

On November 28th, ASX launched a new platform called PureMatch. It debuted with only 10 shares to trade, but this will be expanded up to 200 by December 12th 2011. The most important features that you should be aware of are price and speed.

Orders will cost 0.15 bps (basis points). If you use limit orders (or resting orders) and trade frequently, this can be reduced to 0.05 bps. This allows for a wide variety of trading strategies that profit from very tiny market movements.

CHI-X Trading Platform

Chi-X Australia is owned by Chi-X Global with reaches in Japan, Canada, and Europe. The PureMatch and Chi-X platforms will be similar in that both will have low cost and fast transaction speeds. The current fee structure is 0.06 for passive orders (limit orders) and 0.12 for aggressive orders (market orders).

The prices are slightly cheaper through Chi-X.

What This Means For You

What does this mean for you?

For some it will open a whole new way to trade. Algorithmic trading has been around for quite a few years as computers can execute buy and sell orders faster than a human. With low-latency trading and low-cost fees, expect to see the rise of high frequency trading.

Expect to see a slew of proprietary trading firms open up in Australia or even trading arcades. These are firms that allow you to trade using the firm’s capital and software or your own with aggressive scalping techniques that were not possible under higher fee structures.

High frequency trading usually tightens up the bid-offer spreads making more liquidity available to the market. Fierce competition to be the trading execution venue of choice has already resulted in lower transaction costs and you can expect it to continue to do so. Many platforms offer rebates when making passive or limit order trades. If this happens in Australia, you can expect to see many traders ‘rebate trading’ where they buy and sell shares for exchange credits only.

One by-product of this new development is that institutions will need to be more careful about executing orders as predatory traders will use methods to discover big trades, and then trade against the institution for profit. Another possible downside is an increase in volatility if too many algorithms trade similarly. ‘Flash Crashes’ can happen quickly when allowing automated trading by computer programs.

Baby Steps

If you are interested in scalping, daytrading, or algorithmic trading from remotely home – there are a wide variety of free online equity trading courses, resources and books to get you started. With low transaction fees you can try it out using incredibly small orders of only 100 shares to see whether equity trading is for you. You should expect there to be a few bugs in the system to be worked out since low-latency/high frequency trading is new to Australia.

There are many perks but a few risks to consider as this new style of high-frequency trading is opened up in Australia and PureMatch and Chi-X Australia have taken an early lead to pioneer the technology to Aussies.

day trading
You May Also Like
  • Investing in Cloud Computing Stocks
  • Common Day Trading Myths and Lies Debunked
  • Can I Make Money Day Trading? How to Become a Day Trader?
  • How Much Do I Need To Invest In Shares
  • CFD Types: Direct Market Access (DMA) VS Market Maker (MM) - The Pros & Cons
About Privacy Contact v2.0.1
© 2025 The Domain Publisher Pty Ltd.
This website uses cookies to ensure you get the best experience on our website. Learn more about cookies