THE DISTILLERY: High-frequency fortune

The corporate regulator’s report on high-frequency trading and dark pool operators had a lot riding on it because of the amount of the world’s financial woes that have been blamed on them. This morning, two of Australia’s best business commentators have reacted pretty similarly, while another looks at the rorting in the 457 visa program, where total visas are actually declining.

We start with Fairfax’s Adele Ferguson, who says the report “went relatively easy” on high-frequency trading and dark pools, and focuses on the report’s recommendation that the resting time for a trade of $500 or less should be half a second.

“How it decided on the $500 benchmark is hard to fathom but as one industry expert said, ‘traders will get around this by changing the algorithm to $501’. The report made some interesting observations, such as that the value-weighted average holding period of securities traded by high-frequency traders, during the nine-month period analysed, was 42 minutes. But it qualified it by saying the holding times for individual securities and traders varied greatly, depending on the strategies, ‘risk tolerances’ and signals. ‘Our analysis indicates that, in general, high-frequency traders do not trade (that is, open and close a position) within sub-second intervals. Only 0.1 per cent of high-frequency traders had an average holding time of one second or less.’”

The Australian’s John Durie says the report’s greatest challenge was to “demystify” these practices, which have been thrown into a bunch of scary headlines.

“This required a careful balance between its catchcry ‘technology is the new normal’ and its acknowledgment that there were rorts and blatant conflicts of interests behind closed doors that left the average retail punter a mile behind. To its credit, ASIC went close, although the ringing endorsements from the professional investors club at the Stockbrokers Association and Financial Services Council raise some suspicions. The corporate cop is investing in its own technology with a new system about to be introduced from British-based First Derivatives, which is another step in the right direction.”

Meanwhile, Fairfax’s Tim Colebatch looks at the rorting going on in the 457 visa program to illustrate the point that the quality of debate is pretty lame.

“In 2012-13, skilled migration has declined markedly from Britain, the US, Canada, Germany, South Africa, etc. But in a slowing economy, skilled migration has risen sharply from Ireland, for obvious reasons, India, China, South Korea – and Nepal. Yes – poor, backward Nepal is now one of the 15 main sources of ‘temporary skilled migrants’ to Australia. If that were true, we should be ashamed at luring away their potential leaders.”

Unlike most other commentators that have looked at this issue, Colebatch actually examines where the 457 visas are being used.

In the markets, The Herald Sun’s Terry McCrann looks at the problems in Cyprus and gives a great image to juxtapose the reaction of global sharemarkets to them.

“There really is a butterfly and it lives in distant Cyprus. One flap of its figurative wings and thunderingly dark black storm clouds were sent rolling right over the world's major and indeed minor financial markets.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd also demonstrates some great writing chops in his piece on Origin Energy chief executive Grant King’s presentation yesterday on the Renewable Energy Target.

“His 17-page PowerPoint presentation to a lunch in Sydney organised by the Committee for Economic Development of Australia will go down as a classic for its use of statistical facts to demolish more than 12 months of government rhetoric.”

Elsewhere, Fairfax’s Michael Idato shows yet again in a piece about the first day of Hamish McLennan as Ten Network chief executive that for someone who’s largely a film and television writer, he’s got a terrific business mind.

And finally, Fairfax’s Elizabeth Knight notes that residents in rural areas will feel very different about the proposed removal of the 75 per cent reach rule as part of the media reforms.