Brainteaser You drive 60 miles at an average speed of 30 mph. How fast would you need to drive the same 60 miles back home to average 60 mph over the entire trip?

Market Update Indian Elections The great hedge fund unwind FOMC minutes: slightly dovish (damage control after the “6 months” comment)

Algorithms & High Frequency Trading Rise of the machines

Algorithmic Trading Write code to have your computer trade for you based on a series of rules – Time, price, quantity Two major types of algorithms – Execution – Discretionary

Execution Trading Main functions include – Getting the best entry prices – “Hiding” the order A few methods – TWAP – VWAP

Discretionary Have a series of rules that tells you when to buy/sell securities Price action based: most common and widespread – Supports/resistances, momentum, other price action “rules” Fundamental based: quant modeling

Calibration & Back-Testing

High Frequency Trading Colocation Order priority Liquidity rebates A business model

Market Makers vs. Clients Strategic Differences

Flash Crashes Fat fingers

Criticism of HFT Asymmetric information (arguable) False liquidity Knight Capital implosion Tight bid/ask Pros/Cons

Soullessness has its uses Execution Algorithms