Aaron Brown, Columnist

High-Frequency Trading Is Changing for the Better

Pure speed is no longer the only thing that matters.

February 10, 2020 at 11:00 AM UTC

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

Super fast trading on Wall Street is getting a second wind.
Photographer: Stan Honda/AFP/Getty Images

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There’s been a spate of stories about the troubles of high-frequency trading firms. This is no temporary downswing. The factors that allowed successful firms to trade actively for a decade with seemingly no losing days are gone and there’s no reason to expect them back. Nevertheless, HFT will be as important a force in the market in the 2020s as it was in the two previous decades.

The key is to realize HFT is two things: latency arbitrage and liquidity provision. Latency arbitrage means getting an advantage by being faster. When an order comes to market at a good price, the fastest trader to take it wins. When prices move, the slowest trader to stop taking orders loses.