Will prop shops like JSC/GETCO/DRW/SIG exist 10 years from now?
I know that no one here can predict the future, but some posters seem to be suggesting that trading will be nonexistent in the near future. Is trading (especially firms like the ones I mentioned) really dying out?
Assume that no further financial regulation is passed, but Dodd Frank stays. Will trading cease to exist?
Edit: I should also mention that both regulation and increasing advancements in HFT are reasons it's supposedly dying, or so I've heard
Short answer: Yes.
There will always be some equilibrium number of firms and traders exploiting the arbitrage opportunities available in the market. If there were no arbitrageurs, there would be many arbitrage opportunities which would draw players into the market to exploit them. As for HFT regulation, if the feds decide to enforce some absurd rule like minimum holding periods for securities, that would only reduce the liquidity in the markets and widen the bid-offer spread. There still has to be market participants willing to provide that liquidity.
One thing that may happen as latency goes to zero is that smaller players will be forced out of the game and we will see more consolidation in the industry as only the more established firms can afford the technology overhead to trade at huge volumes, which will be necessary since the profit per trade is miniscule.
I'm more worried about the super computers getting so good to the point where they make it impossible for prop traders to make money then I am regulation.
Yeah, that is one of the reasons I made this topic. Are traders going to become dinosaurs soon?
There will always be a requirement for traders at some level. HFT and Algo trading is based on statistics. That works fine for 99% of the times but there will occasionally be scenarios where there is no historical data in the algorithm to explain what is being seen. That is the most dangerous times for HFT algos and usually they will just shut off.
We are far away from the time where AI and machine learning can handle scenarios where there is no data set to operate on. A trader of 20 years has experience from past events (Black Monday, 9/11, flash crash etc) to draw on. Most HFT solutions I've seen don't look back further than 6 months as it would be a waste of processing resources. They intend to shut off during the really crazy times. This is why the flash crash was so drastic.
Repellat laborum nihil dolorum qui minus. Rem inventore sunt quis aut non autem nihil.
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