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Norway's US$890 billion fund, which considers high-frequency trading a scourge in global financial markets, is taking steps to avoid the practice as it spreads in Asia.
The fund, which owns about 1.3 per cent of the world's equities, has already started to cut back on its use of algorithmic trading to dodge HFT traders who might be trying to pre-empt its moves in the US.
HFT "is now gaining some momentum in Asia - we're definitely following it and we have to do a lot of work on the individual markets," said Oeyvind Schanke, head of asset strategies at the fund. "The whole spectre of trading venues has been catering to high-frequency trading activity, whereas we would like it to focus more toward the institutional need."
Mr Schanke has 10 people working in Oslo, the fund's main office, and in hubs in New York, London and Singapore, looking for ways to cut transaction costs and retain profits when trading in large blocks. Now, he's worried about markets such as Japan.
Michael Lewis drew attention to the concept of "Flash Boys" with his 2014 book by the same name, which argued that HFT firms armed with powerful computers and the fastest connections to exchanges were picking off other investors' trades.
Norges Bank Investment Management, which runs the wealth fund as part of the central bank of Norway, held about US$90.2 billion in Asian stocks at the end of last year. It holds US$511.5 billion in stocks globally and is Europe's biggest equity investor. The fund's stock holdings returned 7.5 per cent in the first quarter, while the total portfolio rose 5.3 per cent.
Critics like Mr Schanke say high-frequency traders harm other investors by sniffing out their strategies and completing the juiciest trades first. Large investors break up their big stock trades and execute them over the course of minutes or hours to disguise their plans.
But if the big investor keeps pumping orders into the market for hours, HFT firms switch roles: They start mimicking trades, making it more costly for them to buy or sell, according to a new paper from VU University Amsterdam's Vincent van Kervel and Albert J Menkveld.
Norway's fund for the first time provided trade data for the study, along with three other investors.
Mr Schanke, who oversees decisions on the companies and instruments the fund investments in, generally prefers slow trading for big orders.
"We could choose to wait four days before we execute in the hope that during the course of those four days we will find a natural counterparty to cross this up with," he said. "We would rather decrease the impact costs and take the opportunity cost risk that arises from it."
Mr Schanke said as a long-term investor, it's worth the wait. "That's what the numbers show."