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From the Author
As time passes, HFT continues to evolve. HFT programs are smarter, better, and more advanced. The largest part of HFT today is devoted to market-making, a traditionally-human activity that is now being automated almost entirely, reducing transaction costs for all investors in the process. Market-making strategies are extensively covered in the 2nd edition of the book. Order execution models facilitating block trades are now dynamic, extending far beyond VWAP in complexity and skill. HFT risk management models and frameworks discussed in detail in the 2nd edition have come of age, too, driven by the desire of stable, consistently profitable operations.
The second edition of high-frequency trading incorporates important developments over the past four years. The book is completely rewritten based on my own trading and portfolio management experiences at ABLE Alpha Trading and our investment consulting clients, the classroom training sessions I've been leading with executives in the investments, brokerage, and trading business all over the world via HFTTraining.com, as well as my graduate students in the department of Finance and Risk Engineering in New York University, Polytechnic Institute, where I've been called upon to serve as an Industry Assistant Professor. The opportunity to explain my research to someone else, both relative novices at NYU and 20-40 year industry veterans at HFTTraining.com, made me rethink the organization of the book to streamline the exposition and to just make it better overall. While the 1st edition of my book detailed many data-driven models, the 2nd edition takes the explanation of old and brand-new HFT models to the next level, often presenting sophisticated ready-to-use frameworks.
Perhaps the most important development over the past four years has been an unparalleled adoption of high-frequency data for analysis and use. It can be hard to believe, but just four years ago many trading desks at top institutions did not think of archiving tick data beyond the 21-day audit trail required then by the regulators. With the realization that historical tick data is a useful and cost-effective tool in development of automated trading strategies, many organizations have been building up the data and competencies in the area. The materials in the new, 2nd, edition of the book cover the requirements of entering the HFT space and other relevant considerations.
HFT is no longer just a convenient way to trade. It is a solid part of Big Data Finance, and is here to stay. I had a great pleasure writing the book with the forward-looking Big-Data outlook in mind, and I hope you will enjoy reading it.