Renaissance Technologies Files Patent To Combat HFT

As Bloomberg reported, high frequency trading firms accounted for half of the volume in U.S. stocks, according to Tabb Group. Firms buy and sell out of positions sometimes within fraction of seconds making the tiniest profit margins. This pattern of trading can lead to a lot of volatility and is a main cause of the flash crash in 2010.

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Renaissance has created a technology that first sends an order to a central sever, which breaks it up into multiple smaller orders. The smaller orders are sent to servers located closest to the exchanges and set to precise times they should be executed. A crucial part of the system are atomic clocks, which can make the whole process occur within nanoseconds; the time difference would be too small for HFT firms to pick up on.

The firm's technology is the first of its kind in the market, and if the patent is approved, Renaissance Technologies could keep its edge for 20 years to come.