From Bloomberg – Even as the money has dried up and HFT’s presence has declined, the regulators are arriving in force. In January, Gregg Berman, a Princeton-trained physicist who’s worked at the Securities and Exchange Commission since 2009, was promoted to lead the SEC’s newly created Office of Analytics and Research. His primary task is to give the SEC its first view into what high-frequency traders are actually doing. Until now the agency relied on the industry, and sometimes even the financial blogosphere, to learn how speed traders operated. In the months after the Flash Crash, Berman met with dozens of trading firms, including HFT firms. He was amazed at how much trading data they had, and how much better their view of the market was than his. He realized that he needed better systems and technologies—and that the best place to get them was from the speed traders themselves.
…………As profits have shrunk, more HFT firms are resorting to something called momentum trading. Using methods similar to what Swanson helped pioneer 25 years ago, momentum traders sense the way the market is going and bet big. It can be lucrative, and it comes with enormous risks. Other HFTs are using sophisticated programs to analyze news wires and headlines to get their returns. A few are even scanning Twitter feeds, as evidenced by the sudden selloff that followed the Associated Press’s hacked Twitter account reporting explosions at the White House on April 23. In many ways, it was the best they could do.
I had thought for awhile that HFT firms might arbitrage themselves out of business and now they have resorted to trend trading to try and make a buck.