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Komfie Manalo, Opalesque Asia:

Marc Malek, managing partner & portfolio manager at Conquest Capital Group believes that one of the biggest risks for traders or portfolio manager is the increase in high frequency trading, and not because of that increase itself but because of the percentage of daily market making that is done by these high frequency funds.

How high frequency funds changed

"Prior to 2008, high frequency funds were doing some market making, and when 2008 happened, a lot of them got taken out but also many of them came to realize that their models worked really well in low vol environments, and not so well in high vol environments. So, in their reincarnation post 2008, they all put volatility filters into it. As long as vol is low, they will make great markets and have a very suppressing effect on volatility. But the minute an exogenous event causes this vol to go beyond a threshold they think it should be, they all turn off the liquidity at the same time and cause massive market dislocation", he told participants of the latest Opalesque 2017 New York Roundtable.

Exhibit A in this behavior would be the the flash-crash of 2010: "I'm sorry, it wasn't that Indian gentleman from Hounslow that caused the flash-crash. It was a lot of the high frequency funds turning off their machines at ......................

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