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There’s more evidence today about the big profitability of computer-driven high-frequency trading.
The Wall Street Journal says Ken Griffin’s Citadel Investment Group hedge fund empire made $1 billion from proprietary trading with HFT last year. The profitability number came out during testimony in an ongoing lawsuit Citadel has filed against a group of former HFT employees who left to start their own firm.
This is the same upstart firm that alleged Goldman Sachs HFT computer code thief Sergey Aleynikov had gone to work for before being nabbed July 4 weekend at Newark Liberty Airport. Aleynikov, who has pleaded not guilty and is trying to work out a plea deal, is set to be in court again on Oct. 16.
What’s worth remembering is this $1 billion figure is just the money raked in by Citadel’s prop trading HFT business. It doesn’t include the dollars Griffin’s empire takes in from market making–a business that’s also driving by HFT computer programs.
One of the many mysteries swirling around high-frequency trading is just how profitable the lightning-fast buying and selling of stocks, options and commodities really is.
The Tabb Group, a financial services industry research firm, recently estimated that the 300 securities firms and hedge funds that specialize in rapid-fire algorithmic trading took in some $21 billion in profits last year. But when pressed on how it arrived at this figure, Tabb representatives won’t say.