Apr-7 (Reuters) - Tumbling technology costs have opened potentially lucrative ultra-fast trading strategies to tiny startup players, fuelling growth of the opaque and controversial business across Europe and the United States.
Backed by private equity, or armed with bonuses earned at banks, traders have been encouraged by an 80 percent or greater fall in the cost of setting up lightning-fast systems over the past five years, trading software provider Portware said.
"The numbers of these firms has exploded," Richard Balarkas, chief executive of broker Instinet Europe, said at the Reuters Global Exchanges and Trading Summit last week.
"I hear venture capitalists are giving money to guys coming straight out of MIT (Massachusetts Institute of Technology) and setting up desks," he said.
In high-frequency trading, firms such as hedge funds use lightning-fast computers to beat other investors to profitable trades, sometimes moving their computers physically next to an exchange to gain an extra advantage. It is a highly secretive world, where the fear to give away trading secrets is omnipresent and there is often no accountability to external investors.
Backed by private equity, or armed with bonuses earned at banks, traders have been encouraged by an 80 percent or greater fall in the cost of setting up lightning-fast systems over the past five years, trading software provider Portware said.
"The numbers of these firms has exploded," Richard Balarkas, chief executive of broker Instinet Europe, said at the Reuters Global Exchanges and Trading Summit last week.
"I hear venture capitalists are giving money to guys coming straight out of MIT (Massachusetts Institute of Technology) and setting up desks," he said.
In high-frequency trading, firms such as hedge funds use lightning-fast computers to beat other investors to profitable trades, sometimes moving their computers physically next to an exchange to gain an extra advantage. It is a highly secretive world, where the fear to give away trading secrets is omnipresent and there is often no accountability to external investors.