The Fast Track to the Futures: Technological Innovation, Market Microstructure, Market Participants, and the Regulation of High-Frequency Trading

2015 ◽  
pp. 247-285
Author(s):  
Barbara J. Mack
Keyword(s):  
Technological Innovation ◽  
Market Microstructure ◽  
High Frequency ◽  
Fast Track ◽  
High Frequency Trading ◽  
Market Participants

scholarly journals What is a 'Real' Transaction? Infrastructures, relations and Spoofing in High-Frequency Trading

2016 ◽  
Author(s):  
Juan Pablo Pardo Guerra
Keyword(s):  
Financial Markets ◽  
High Frequency ◽  
High Frequency Trading ◽  
Market Behavior ◽  
Digital Platforms ◽  
Market Participants

Although an old and rare practice, spoofing has re-emerged as a subject ofintense debate within modern financial markets. An activity entailing thefraudulent creation of orders to buy and sell securities with the purposeof manipulating the market, spoofing highlights the multiple and complexmoral valences of contemporary, automated, finance. In this paper, I studyspoofing as an opportunity to understand markets and their relations ofexchange. In particular, by extending Weberian metaphors of markets asmoral and organizational communities, I examine how the courts and marketparticipants distinguish the ‘false’ transactions of spoofing from the‘real’ exchanges of 'normal' market behavior. Combining Marilyn Strathern’stheoretical discussion of the anthropological relation with recentliteratures on infrastructures and markets, I argue that the perceivedreality of transactions is a product of how novel forms of economicknowledge are able to make sense of ‘taken for granted’ behavioral patternswithin digital platforms of market action. The intent that constitutes‘real’ trades is therefore a product of how market participants, economicexperts and the courts interpret the operational underbelly of markets andthe relations that they produce.

High-Frequency Trading and Conflict in the Financial Markets

2017 ◽  
Vol 32 (3) ◽  
pp. 270-282 ◽  
Author(s):  
Ricky Cooper ◽  
Jonathan Seddon ◽  
Ben Van Vliet
Keyword(s):  
Financial Markets ◽  
High Frequency ◽  
High Frequency Trading ◽  
Market Makers ◽  
Market Participants ◽  
Software Vendor ◽  
Traditional Market ◽  
Recent Developments ◽  
The Way

The last few decades has seen an ever-increasing growth in the way activities are productized and associated with a financial cost. This phenomenon, termed financialization, spans all areas including government, finance, health and manufacturing. Recent developments within finance over that past decade have radically altered the way trading occurs. This paper analyses high-frequency trading (HFT) as a necessary component of the infrastructure that makes financialization possible. Through interviews with HFT firms, a software vendor, regulators and banks, the effects of HFT on market efficiency, and its impact on costs to long-term investors are explored. This paper contributes to the literature by exploring the conflict that exists between HFT and traditional market makers in today's fragmented markets. This paper argues that society should be unconcerned with this conflict and should instead focus on the effects these participants have on the long-term investors, for whom the markets ultimately exist. In order to facilitate the best outcomes, regulation should be simple, aimed at keeping participants’ behavior stable, and the interactions among them transparent and straightforward. Financialization and HFT are inextricably linked, and society is best served by ensuring that the creative energy of these market participants is directed on providing liquidity and removing inefficiencies.

scholarly journals High‑Frequency Trading in the Modern Market Microstructure: Opportunities and Threats

2019 ◽  
Vol 7 (3) ◽  
pp. 25-36
Author(s):  
M. Zharikov
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Market Microstructure ◽  
High Frequency ◽  
Financial Engineering ◽  
Market Design ◽  
High Frequency Trading ◽  
Optimal Trading ◽  
Trading Market ◽  
Long Run

The article covers some ideas about the research on high-frequency trading and financial market design. The topic is time-relevant because today there exists a need to convince traders that there is a simple structural floor in the way that the financial markets are designed. The article reveals the significance of trading on the floor that the foremost fundamental constraint is limited time. The author proves that time on the financial market feels, to some extent, infinite when someone counts it in millions of seconds, but time is nevertheless finite. The author then gets into the actual research on high-frequency trading in the financial market design. The motivation for this project is to analyse activity among high-frequency trading firms by which investments of substantial sums of money are understood as economically trivial speed improvements. The theoretical significance of the research’s outcomes lies in outlaying the systemic approach to dealing with stochastic control problems in the context of financial engineering. The practical relevance of the paper lies in the mechanism that allows solving problems surrounding optimal trading, market microstructure, high-frequency trading, etc. The article concludes by talking about the issues in the modern electronic markets and by giving lessons to dealing with them in the long run.

COMMENTARY: A Retrospective Look: Phantom Liquidity and High-Frequency Quoting

2018 ◽  
Keyword(s):  
High Frequency ◽  
Lower Cost ◽  
Price Discovery ◽  
High Frequency Trading ◽  
Limit Order ◽  
Market Participants ◽  
Liquidity Provision

In this paper we take a retrospective look at our paper “Phantom Liquidity and High-Frequency Quoting” and discuss the context of the research in light of our broader inquiry into the nature of the high-frequency trading industry. The data presented in this paper appear to show that limit order cancellations of high-frequency traders are associated with price discovery and liquidity provision, rather than some manner of systematic taking advantage of other market participants. These firms are acting as rational, profit-seeking businesses, and we believe time has shown this view to be correct. In the years since publication, HFT has matured, and consolidated into fewer, lower-cost providers of efficiency and liquidity services, much like we would expect in any other industry.

scholarly journals High-frequency trading and networked markets

2021 ◽  
Vol 118 (26) ◽  
pp. e2015573118
Author(s):  
Federico Musciotto ◽  
Jyrki Piilo ◽  
Rosario N. Mantegna
Keyword(s):  
Financial Markets ◽  
High Frequency ◽  
Market Liquidity ◽  
High Frequency Trading ◽  
Complex Network Theory ◽  
Market Participants ◽  
Liquidity Provision ◽  
Regulatory Constraints ◽  
Great Heterogeneity ◽  
Trading Decisions

Financial markets have undergone a deep reorganization during the last 20 y. A mixture of technological innovation and regulatory constraints has promoted the diffusion of market fragmentation and high-frequency trading. The new stock market has changed the traditional ecology of market participants and market professionals, and financial markets have evolved into complex sociotechnical institutions characterized by a great heterogeneity in the time scales of market members’ interactions that cover more than eight orders of magnitude. We analyze three different datasets for two highly studied market venues recorded in 2004 to 2006, 2010 to 2011, and 2018. Using methods of complex network theory, we show that transactions between specific couples of market members are systematically and persistently overexpressed or underexpressed. Contemporary stock markets are therefore networked markets where liquidity provision of market members has statistically detectable preferences or avoidances with respect to some market members over time with a degree of persistence that can cover several months. We show a sizable increase in both the number and persistence of networked relationships between market members in most recent years and how technological and regulatory innovations affect the networked nature of the markets. Our study also shows that the portfolio of strategic trading decisions of high-frequency traders has evolved over the years, adding to the liquidity provision other market activities that consume market liquidity.

The microgeographies of global finance: High-frequency trading and the construction of information inequality

2016 ◽  
Vol 49 (1) ◽  
pp. 121-140 ◽  
Author(s):  
Matthew Zook ◽  
Michael H Grote
Keyword(s):  
Capital Markets ◽  
High Frequency ◽  
Spatial Configuration ◽  
Computer Architectures ◽  
High Frequency Trading ◽  
Stock Exchanges ◽  
Global Finance ◽  
Market Participants ◽  
Trading Activities ◽  
Continuous Trading

Automated high-frequency trading has grown tremendously in the past 20 years and is responsible for about half of all trading activities at stock exchanges worldwide. Geography is central to the rise of high-frequency trading due to a market design of “continuous trading” that allows traders to engage in arbitrage based upon informational advantages built into the socio-technical assemblages that make up current capital markets. Enormous investments have been made in creating transmission technologies and optimizing computer architectures, all in an effort to shave milliseconds of order travel time (or latency) within and between markets. We show that as a result of the built spatial configuration of capital markets, “public” is no longer synonymous with “equal” information. High-frequency trading increases information inequalities between market participants.

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