Front-Running Scalping Strategies and Market Manipulation: Why Does High-Frequency Trading Need Stricter Regulation?

2016 ◽  
Vol 51 (3) ◽  
pp. 363-402 ◽  
Author(s):  
Viktor Manahov
Keyword(s):  
High Frequency ◽  
High Frequency Trading ◽  
Market Manipulation ◽  
Front Running

scholarly journals The Flash Crash Of May 2010: Accident Or Market Manipulation?

2011 ◽  
Vol 9 (1) ◽  
Author(s):  
Chris Rose
Keyword(s):  
High Frequency ◽  
High Frequency Trading ◽  
Market Manipulation ◽  
Font Size ◽  
Wall Street ◽  
Flash Crash

<p class="MsoNormal" style="text-align: justify; line-height: normal; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt;">On May 6th., 2010, the Dow fell about a thousand points in a half hour and Wall Street lost $800 billion of value. Some claim that it was just an isolated incident and there was nothing nefarious but with the majority of trading being done by electronic exchanges and with the increase in High Frequency Trading, evidence is emerging that the crash just might have been a case of deliberate manipulations of the market.</span></p>

Part III Trading, 17 Algorithmic Trading and High-Frequency Trading (HFT)

2017 ◽  
Author(s):  
Conac Pierre-Henri
Keyword(s):  
High Frequency ◽  
High Frequency Trading ◽  
Algorithmic Trading ◽  
Technical Approach ◽  
Great Cost ◽  
Scarce Resources ◽  
Flash Crash ◽  
Market Abuse ◽  
Front Running ◽  
Do So

This chapter analyses the MiFID II rules on algorithmic trading (AT), including high-frequency trading (HFT). The author argues that AT raises serious issues of volatility and systemic risk, and HFT issues of systematic front-running of investors. However, opinions are divided on the benefits and risks of these techniques, especially HFT. MiFID II takes a technical approach mostly focused on prevention of a repeat of the 2010 ‘Flash Crash’ with provisions on market abuse. The ESMA 2012 Guidelines remain the most effective regulation to frame the development of HFT, able to tackle market developments with relative speed. However, with implementation of the directive still far away, prosecution of market abuse among HFT traders by legislators and supervisors could lead to a de facto ban of HFT in some Member States. However, the author argues that supervisors would need to allocate scarce resources to it, at great cost, and only the most motivated supervisors will do so.

The Wild Side of the Street

2018 ◽  
Author(s):  
Louçã Francisco ◽  
Ash Michael
Keyword(s):  
Seventeenth Century ◽  
High Frequency ◽  
Bank Lending ◽  
High Frequency Trading ◽  
Market Manipulation ◽  
Rating Agencies ◽  
The World ◽  
European Colonization ◽  
Financial Scandals ◽  
History Of

Chapter 9 traces a history of bubbles and financial scandals from the Dutch tulip mania of the seventeenth century to frauds associated with European colonization of the Americas to financial misdeeds of the twentieth and twenty-first centuries. Dirty finance is everywhere. Sometimes it is the source of the funds: the world’s most reputable banks have handled funds from highly disreputable sources. In other cases, clean wealth goes through dirty handling. Offshore finance shelters the great family fortunes, at the edge of legality. High frequency trading blurs the line between quick wits and market manipulation. Cartels of traders enrich themselves at the expense of clients. The rating agencies rate complex securities as sound with minimal investigation. In the Libor scandal, the biggest banks conspired to mislead the world about inter-bank lending. A description of the instruments, transactions, and the mechanisms of manipulation and fraud is provided.

scholarly journals Aggressive and Defensive High‑Frequency Trading and its Impact on Liquidity of German Stock Market

2016 ◽  
Vol 64 (6) ◽  
pp. 1911-1918
Author(s):  
Juraj Hruška
Keyword(s):  
High Frequency ◽  
Stock Exchange ◽  
Low Frequency ◽  
Positive Influence ◽  
Market Liquidity ◽  
High Frequency Trading ◽  
Market Manipulation ◽  
Limit Orders ◽  
Market Risks ◽  
German Stock

Algorithmic trading and especially high frequency trading is the concern of the current research studies as well as legislative authorities. It is also the subject of criticism mostly from low frequency traders and long-term institutional investors. This is due to several cases of market manipulation and flash crashes in the previous years. Advocates of this trading mechanism claim that it has large positive influence on the market, such as liquidity growth by lowering spreads and others. This paper is focused on testing the relationship between market liquidity of shares traded on Frankfurt Stock Exchange and HFT activity on European stock markets. Author proposes own methodology for measuring dynamics in HFT activity, without knowledge of original market messages. Liquidity is measured by various from of price spreads. Econometrical methods for panel regression are used to determine these relations. Results of this paper will reveal the relevance of the HFT trader’s main argument about creating liquidity and hence reducing market risks related with high spreads and low number of limit orders.

scholarly journals Front-Running and Market Quality: An Evolutionary Perspective on High Frequency Trading

2017 ◽  
Vol 18 (4) ◽  
pp. 727-741 ◽  
Author(s):  
Thorsten Hens ◽  
Terje Lensberg ◽  
Klaus Reiner Schenk-Hoppé
Keyword(s):  
High Frequency ◽  
High Frequency Trading ◽  
Market Quality ◽  
Evolutionary Perspective ◽  
Front Running

High-Frequency Financial Econometrics

2014 ◽  
Author(s):  
Yacine Aït-Sahalia ◽  
Jean Jacod
Keyword(s):  
High Frequency ◽  
Practical Importance ◽  
Financial Econometrics ◽  
Trading Strategies ◽  
Financial Data ◽  
Jump Processes ◽  
High Frequency Trading ◽  
Microstructure Noise ◽  
Econometric Methods ◽  
Mathematical Foundations

High-frequency trading is an algorithm-based computerized trading practice that allows firms to trade stocks in milliseconds. Over the last fifteen years, the use of statistical and econometric methods for analyzing high-frequency financial data has grown exponentially. This growth has been driven by the increasing availability of such data, the technological advancements that make high-frequency trading strategies possible, and the need of practitioners to analyze these data. This comprehensive book introduces readers to these emerging methods and tools of analysis. The book covers the mathematical foundations of stochastic processes, describes the primary characteristics of high-frequency financial data, and presents the asymptotic concepts that their analysis relies on. It also deals with estimation of the volatility portion of the model, including methods that are robust to market microstructure noise, and address estimation and testing questions involving the jump part of the model. As the book demonstrates, the practical importance and relevance of jumps in financial data are universally recognized, but only recently have econometric methods become available to rigorously analyze jump processes. The book approaches high-frequency econometrics with a distinct focus on the financial side of matters while maintaining technical rigor, which makes this book invaluable to researchers and practitioners alike.

High-Frequency Trading

2011 ◽  
Author(s):  
Peter Gomber ◽  
Björn Arndt ◽  
Marco Lutat ◽  
Tim Elko Uhle
Keyword(s):  
High Frequency ◽  
High Frequency Trading
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