Book Review: The Speed Traders An Enlightening Book: Perez Illuminates the World of Speed

May 6, 2011 - PRLog -- “Alternating between an annotated timeline of the development of high-frequency trading and interviews with top high-frequency traders, Perez illuminates the world of speed.” That is how Seeking Alpha’s Brenda Jubin starts her review of The Speed Traders, An Insider's Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World (http://www.thespeedtraders.com), by recognized author Edgar Perez, title recently published by McGraw-Hill Inc., right on time for the anniversary of the "flash crash" that impacted the financial markets May 6 last year.

“Speed does not automatically translate into profit. Manoj Narang, the founder of Tradeworx, speaks to this point. “Profitability,” he explains, “can have two distinct meanings in the realm of high frequency, and these meanings are almost mutually exclusive. When applied to high-frequency trading, profitability usually refers to the consistency of profits, because consistency is what makes high-frequency trading so appealing. … However, to most people profitability means something entirely different, which is the overall amount of profit generated. In this regard, the highest-turnover strategies are at a decided disadvantage.” A typical trade will return only about 0.1 cent per share. “And that only includes trading costs, not the costs of running such an expensive and technology-intensive business to begin with!”

“Moreover, he continues, assume that high-frequency traders account for the entire market volume, which has averaged 8 billion shares per day, and that they make 0.1 cent per share of profit. The yearly profit would come to $2 billion. “This might sound like a lot of money, but let’s keep in mind that this is the total amount for an entire industry. There are many other corners of the financial industry, such as derivatives trading or hedge funds, that generate hundreds of times this amount of profit in one year.”

“Perez explores the charges that have been brought against high-frequency trading and for the most part, with the help of his interviewees, tries to dispel them. Did high-frequency trading cause the Flash Crash? No. As David Cummings, chairman of Tradebot Systems, wrote: ‘Who puts in a $4.1 billion order without a limit price? The trader at Waddell & Reed showed historic incompetence.’”

“Some traders also point the finger at the practice of busting trades, which can punish liquidity providers. The Speed Traders offers a sympathetic portrait of an industry that is often demonized. By tracing its roots (going back to Instinet, which began operating under an unwieldy name in 1970), Perez demonstrates it to be a logical development of technological change in the financial markets. By separating out some controversial practices, such as flash orders, from high-frequency trading, Perez makes it more defensible. All in all, an enlightening book.”

The Speed Traders, published by McGraw-Hill Inc., is the most comprehensive, revealing work available on the most important development in trading in generations. High-frequency trading will no doubt play an ever larger role as computer technology advances and the global exchanges embrace fast electronic access. The Speed Traders explains everything there is to know about how today's high-frequency traders make millions—one cent at a time.”

Mr. Perez is widely regarded as the pre-eminent networker in the specialized area of high-frequency trading. He is the founder of Golden Networking and host of High-Frequency Trading Happy Hour business receptions (http://www.hfthappyhour.com) in New York City, which have drawn the world's top industry practitioners. He has organized high-frequency trading forums (http://www.hftleadersforum.com) and workshops (http://www.hftexpertsworkshop.com), as well as conferences on subjects as diverse as hedge funds, derivatives, private equity, distressed investing, and China, attracting thousands of executives and professionals in the world's major business centers. Mr. Perez has presented at Harvard Business School's 17th Annual Venture Capital & Private Equity Conference and at forums organized by Columbia Business School's Career Management Center and Alumni Club of New York.

Mr. Perez was a vice president at Citigroup, a senior consultant at IBM, and a consultant at McKinsey & Co. in New York City. Mr. Perez has an undergraduate degree from Universidad Nacional de Ingeniería, Lima, Peru (1994), a Master of Administration from Universidad ESAN, Lima, Peru (1997) and a Master of Business Administration from Columbia Business School, with a dual major in Finance and Management (2002). He is a member of the Beta Gamma Sigma international honor society. Mr. Perez resides in the New York City area and is an accomplished salsa and hustle dancer.

Mr. Perez is one of the great business networkers and motivators on the lecture circuit; he is available worldwide for the following speaking engagements: Present and Future of High-Frequency Trading, The Real Story behind the "Flash Crash", Networking for Financial Executives, and Business Networking for Success.

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The Speed Traders (http://www.thespeedtraders.com), Mr. Edgar Perez, founder of the prestigious business networking community Golden Networking (http://www.goldennetworking.net), opens the door to the secretive world of high-frequency trading (HFT).