Home » Market Structure » Tradeworx, Inc. Public Commentary on SEC Market Structure Concept Release

Tradeworx, Inc. Public Commentary on SEC Market Structure Concept Release

Manoj Narang, Tradeworx, Inc. Public Commentary on SEC Market Structure Concept Release, Apr 2010, here. Fairly singular presentation, that I haven’t seen before. Must be the outline for the book?

BASIC ECONOMICS OF HFT IN US EQUITY MARKET

net profit margin: approx 10 mils per share (i.e. 0.1 cents per share) source: Tradeworx high-frequencyproprietary trading,year 2009, source: Traders Magazine Oct 2005 Q&A With Dave Cummings, source: Knight Trading (Nasdaq: NITE) 2009 10K filing

brokerage fees: 0.25 – 5 mils per share –  source: Tradeworx, various brokerage firms

sec fees: 5.4 mils / share – assumes rate of $16.90 per million – assumes average stock price: 63.8 (stock prices weighted by quarterly dollar volume, as of 3/19/2010)

average trading market share: 40% – source: Tradeworx estimate; industry estimates range from 30% – 60%

total annual profits: $2Bn / yr – assumes: 8 Bn shares / day of HF volume: 40% market share * 10 Bn shares/day * 2 assumes 10 mils/share of net profit (8B shares) X (10 mils per share) equals $8M/day of profit ($8M per day) X (250 trading days) equals $2Bn per year

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