What is the most effective way of determining & measuring the level of HFT activity in a stock

[Tom DEletto]

On a security by security basis, I want to be able to quantify the level of HFT activity (and later institutional & retail activity). Is it higher than it normally is? How much so?
What would you say is the best way to measure? Number of quotes? # of quotes relative to volume? Relative to # of trades? Spread volatility? Reversals after block prints?

 

[Dylan]

Let me ask you an almost equivalent question: what do you consider high frequency trading?

 

[Tom DEletto]

At a minimum, I'd call it anyone who isn't looking to hold an overnight position - any holding time less than one day. Certainly, there is a lot of 'ultra-high frequency' trading where the average holding time is seconds and that probably makes up the lions share of the volume, but for ease of definition I'd go with trading with a holding period of less than one day.

 

[Mirko]

Tom, the first step to assess the level of high frequency trading on a future (for example) is to find a reliable high quality datafeed that provides you the best unfiltered tick data. Then, you must build a piece of program in order to process your data and obtain information. HFT can be a lot of things. Try to start thinking it as a big number of small orders in less than a second!