Article Title
Abstract
High-Frequency Trading ("HFT") is a diverse set of algorithmic trading strategies characterized by fast order execution. Its importance in international markets has increased vastly in recent years. From a regulatory perspective, HFT presents difficult and partially unresolved questions. The difficulties stem partly from the fact that HFT encompasses a wide range of trading strategies, and partly from a dearth of unambiguous empirical findings about HFT's effects on markets. Yet certain important conclusions are broadly accepted. HFT can increase systemic risk by causing or exacerbating events like the "Flash Crash" of May 6, 2010. HFT can also enable market manipulators to go undetected. Finally, HFT's supposed benefits to market quality (i.e., the complex and interrelated topics of liquidity, volatility, and price discovery) are questionable. Overall, the empirical research does not demonstrate that HFT has substantial social benefits justifying its clear risks. Regulatory measures including stronger monitoring, order cancellation taxes, and resting rules deserve more urgent attention.
Recommended Citation
Matt Prewitt,
High-Frequency Trading: Should Regulators Do More,
19
Mich. Telecomm. & Tech. L. Rev.
131
(2012).
Available at:
https://repository.law.umich.edu/mttlr/vol19/iss1/4