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