Does High-Frequency Trading Increase Systemic Risk?

2016 ◽  
Author(s):  
Pankaj K. Jain ◽  
Pawan Jain ◽  
Thomas H. McInish
Keyword(s):  
Systemic Risk ◽  
High Frequency ◽  
High Frequency Trading

Global Algorithmic Capital Markets

2018 ◽  
Keyword(s):  
Public Policy ◽  
Capital Markets ◽  
Systemic Risk ◽  
High Frequency ◽  
Investor Protection ◽  
High Frequency Trading ◽  
Market Making ◽  
Market Governance ◽  
Policy Objectives ◽  
The Impact

This book illustrates and assesses the dramatic recent transformations in capital markets worldwide and the impact of those transformations. ‘Market making’ by humans in centralized markets has been replaced by supercomputers and algorithmic high frequency trading operating in often highly fragmented markets. How do recent market changes impact on core public policy objectives such as investor protection, reduction of systemic risk, fairness, efficiency, and transparency in markets? The operation and health of capital markets affect all of us and have profound implications for equality and justice in society. This unique set of chapters by leading scholars, industry insiders, and regulators sheds light on these and related questions and discusses ways to strengthen market governance for the benefit of society at large.

European Legal Framework for Algorithmic and High Frequency Trading (Mifid 2 and MAR)

2018 ◽  
Vol 9 (1) ◽  
pp. 146-153 ◽  
Author(s):  
Tilen ČUK ◽  
Arnaud VAN WAEYENBERGE
Keyword(s):  
Mathematical Modelling ◽  
Systemic Risk ◽  
High Frequency ◽  
Financial Innovation ◽  
Legal Framework ◽  
Computer Hardware ◽  
High Frequency Trading ◽  
Computer Algorithms ◽  
Early Assessment ◽  
Market Abuse

AbstractAlgorithmic and high frequency trading use computer algorithms to execute strategies and the confluence of trends in computer hardware, programming, mathematical modelling, and financial innovation have pushed the limits of trading speed to unprecedented levels. Algorithms are fast and automatically spread disruptions through the financial system. Over the last decade, the ensuing systemic risk called for new regulations. This article attempts an early assessment of the new European legal framework (Mifid 2 and Market Abuse Regime) intended to tackle the technological risks of the modern trading paradigm.

Does high-frequency trading increase systemic risk?

2016 ◽  
Vol 31 ◽  
pp. 1-24 ◽  
Author(s):  
Pankaj K. Jain ◽  
Pawan Jain ◽  
Thomas H. McInish
Keyword(s):  
Systemic Risk ◽  
High Frequency ◽  
High Frequency Trading

scholarly journals High-Frequency Trading and Systemic Risk: A Structured Review of Findings and Policies

2020 ◽  
Vol 71 (3) ◽  
pp. 169-195
Author(s):  
Antonio Sánchez Serrano
Keyword(s):  
Market Power ◽  
Systemic Risk ◽  
High Frequency ◽  
Information Technologies ◽  
High Frequency Trading ◽  
Barriers To Entry ◽  
Negative Contribution ◽  
Academic Literature ◽  
Market Makers ◽  
Use Of Technology

Abstract A wider use of technology has contributed to the rapid growth of trading in stock markets in the last decades, resulting in an increase in the number of participants and a sharp decline in the price of information. High-frequency trading could be seen as a manifestation of this development. A review of the main findings in the academic literature leads to the identification of four main systemic vulnerabilities related to high-frequency trading: (i) adverse selection in orders, with the potential of crowding-out non-HFT market makers in times of stress; (ii) correlation of positions and herd behaviour; (iii) market power that, via technological costs, may impose barriers to entry; and (iv) negative contribution, in some circumstances, to price discovery. The first vulnerability could create systemic risk and several scholars have discussed the introduction of a limit in the speed of trading to address it. This could also contribute to reduce market power of high-frequency traders and over-investment in information technologies. Despite intense research efforts, further data and research is still needed to better understand these vulnerabilities and the adequacy of policies to address them.

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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