Flash mob
Australia's financial centres often struggle to compete with other regional hubs, but Sydney has carved out a credible niche in high-frequency trading.
Since at least the 1990s, Australian governments of all persuasions have talked up ambitions of developing Sydney into a regional financial services hub. It was always a fanciful dream, given the sheer distance between Australia and the booming financial centres of Asia, where the regulatory burden on the industry tends to be lower, and the incentives on offer are often far more generous. So the ambition has never been realised.
Nevertheless, Sydney has managed to establish itself as a credible regional hub in at least one corner of the financial services landscape. It’s a part of the market that is relatively secretive, widely misunderstood and extremely lucrative: high-frequency trading, or HFT.
This week, Capital Brief's Jack Derwin has written a series of stories on HFT, the algorithmic trading of large volumes of shares at incredibly rapid speeds. First, he uncovered the booming local businesses of offshore HFT firms such as Netherlands-based Optiver, which surpassed $1 billion in local revenue last year, its compatriot and rival IMC Trading, Philadelphia-based Susquehanna International and Miami-based Citadel Securities.
Today, in this longer read, Jack revealed the fast-growing local operations of these HFT firms actually have little to do with Australia per se. Instead, they are using their Sydney outposts as a base to trade Chinese and Indian markets, which are much deeper and more lucrative than Australia’s.
