BusinessWeek published this article by Mathew Philips on high frequency trading.
He relates the rise of several HFT firms:
By 2010, HFT accounted for more than 60 percent of all U.S. equity volume and seemed positioned to swallow the rest.
Now, he predicts the end is nigh:
For the first time since its inception, high-frequency trading, the bogey machine of the markets, is in retreat.
Speed traders aren’t just trading fewer shares, they’re making less money on each trade. Average profits have fallen from about a tenth of a penny per share to a twentieth of a penny.
This could be due to increased competition and higher fees for co-location. Now there’s extra regulation:
Last fall the SEC said it would pay Tradeworx, a high-frequency trading firm, $2.5 million to use its data collection system as the basic platform for a new surveillance operation. Code-named Midas (Market Information Data Analytics System), it scours the market for data from all 13 public exchanges.