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#HFT action on the $TSXV and the coming revolt

Posted by justiceisfalse at 5:36 PM on Monday, August 13th, 2012

As is the de rigueur, when things go badly, people look at who they can point their fingers at. In the world of the $TSXV there have been a slew of fingers pointed, most recently High Frequency Trading (#HFTs)  or Algorithmic trading (algos) has been under the gun from the investing community.

Last week I received the email below with Background on Manipulative trades as an attachement.

IROC recently issued a policy on Manipulative and Deceptive Practices that are related to algorithm trading. 
 
I attach a commentary which I have prepared on one aspect of this situation.  IIROC is looking for comments and I am interested for any situations/examples which I could highlight to them.
 
If you know of any examples that I could explore, feel free to call me.  You can certainly pass this document along if you believe it is of interest for someone in your circle.
 
I look forward to hearing from you.

This gentlemen is the person I know of who is going to IIROC to try and curtail what seems to be the inevitable. The other is an investment advisor out of Calgary.

As an active participant in the $TSXV market as well as other exchanges and platforms, I have to say that the volume of algorithmic trading is visibly lower on the $TSXV than anywhere else. I also posit that the $TSXV participants in general are much less technologically inclined and slower to adopt new trends so the lower adoption rate isn’t that surprising.

The retail investor has been and will likely continue to be the largest voice of the negative side of algos. If you know nothing about the market and can’t read price-action, whether algos “fleece” you or someone else does is irrelevant. If you are savvy and can adapt, you can play ball with them. Two great example as of late are $GQC.CA and $CSQ.CA who have had good rides on solid drill holes. Algos will drive the price up and it is a wave you can ride if you can read the patterns of the stock churn and understand how these systems work – just don’t get stuck being a bag holder (!).

This story is just starting to unravel in Canada and I expect it to get a whole lot juicier in the coming months.