Wisdom in fragments

Looking at the bond market to provide you protection from inflation is a fools game. If you are really worried about inflation- you have to buy stocks.

The only value that government paper provides you at this point is, basically, the fact that if everything goes to 'hell in a handbasket' that you have some assets of value.

The true risk with all of these securities is the fact that real-yields are actually negative. So I don't think this is an issue of ability or willingness to pay, it's really that you are getting negative real returns.

To take the example to an extreme, consider how many real estate or private equity transactions are currently executed by a computer versus a human being. Being an 'alpha-less market maker' in such a market is not possible.

Academics, research analysts, and even regulatory agencies have recognized that today's markets are more liquid and less expensive than before the advent of HFT. This is no doubt due in part to the improvement in liquidity provisioning that has arisen from the better risk management that computers provide over human traders.

Once one understands the disadvantage of being at the bottom of the stack, it becomes much easier to understand the importance of speed in HFT. As new price levels form, HFTs compete with other HFTs to join the new price as quickly as possible in order to secure advantageous stack position for passive orders.

To give a sense of perspective, consider that an HFT making $0.001 per share in SPY has an alpha that is worth roughly 0.0008%. A one penny spread is ten times this amount. In contrast, long term investors are able to effectively employ active strategies. Their alphas are orders of magnitude greater than the cost of crossing the spread.

The majority of US Equity HFT is employed in the strategy of liquidity provisioning, also known as electronic market making. Historically, such a service was provided by NYSE specialists and NASDAQ market makers but, with the advent of decimalization, human specialists and market makers were no longer able to keep up with the liquidity demands of investors and automated technology became necessary for this function.

The absolute biggest risk out there I can identify would be if something went really wrong with China as it is so important to the BRIC and global economic future. Luckily, I think it is a small risk.

Economist who coined the term "BRICS" for emerging markets.

I think the biggest risk is the situation with the EMU as I have explained. I can see that this has the potential to derail the world economy in the same way the 2008 credit crisis did.

Economist who coined the term "BRICS" for emerging markets.

I think the 2008-2011 era has demonstrated that there are major problems with the structure and governance of the EMU and there is need for considerable change, probably more fiscal and political union, of which a common Euro denominated bond will be part of.

Economist who coined the term "BRICS" for emerging markets.

This decade, their GDP will increase by about $12 trillion, i.e. they will create another one of themselves! More importantly, the share of consumption in this decade's growth will be bigger and this is where the big opportunity lies.

Economist who coined the term "BRICS" for emerging markets.

I think you'll see strong growth in the markets in developing economies like Brazil, India, China, Mexico, Malaysia, Singapore and places like that. In that sense, it will be a larger market- a growing pie- risk in that sense will be distributed more.

Former CEO of CME Group, global derivatives exchange leader.

These markets will become a crucible for innovation and dynamic change. This will give more growth to derivative markets as we move forward.

Former CEO of CME Group, global derivatives exchange leader.

One of the things which is a really distinguishing factor about our markets in contrast to the OTC derivative market is that we're completely open, competitive and transparent with a very high degree of participation, a very high turnover, and a high degree of pre and post trade price transparency.

Former CEO of CME Group, global derivatives exchange leader.

If you look at the notional value of trading on our exchanges in any given year, they range from $600-700 trillion to a quadrillion dollars in total value. People can use these markets very effectively, not just for bona-fide risk hedging and transfer and risk management but also for asset allocation, portfolio management and trading strategies as well.

Former CEO of CME Group, global derivatives exchange leader.