High-Frequency Trading in the Stock Market and the Costs of Option Market Making

2020 ◽  
Author(s):  
Mahendrarajah Nimalendran ◽  
Khaladdin Rzayev ◽  
Satchit Sagade
Keyword(s):  
Stock Market ◽  
High Frequency ◽  
High Frequency Trading ◽  
Market Making ◽  
Option Market

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 ‘Market making’ by humans in centralized markets has been replaced by supercomputers and algorithmic high frequency trading operating in often highly fragmented markets.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.

scholarly journals The Ethics of Financial Market Making and Its Implications for High-Frequency Trading

2021 ◽  
Author(s):  
Andrea Roncella ◽  
Ignacio Ferrero
Keyword(s):  
Financial Market ◽  
High Frequency ◽  
Common Good ◽  
High Frequency Trading ◽  
Wealth Accumulation ◽  
Real Economy ◽  
Market Making ◽  
Modern Times ◽  
Financial Innovations ◽  
The Common

AbstractDuring the last 20 years, the financial sector has undergone an unprecedented transformation due to new regulations and the implementation of several technological advancements. The combination of regulation and technology has brought about new financial processes that have fundamentally changed how financial market making is done. This paper studies the ethics of financial market making and its implications for one of the most controversial financial innovations of modern times, namely high-frequency trading (HFT). We claim that the Aristotelian distinction between natural chrematistics, which is aimed at serving the real economy, and unnatural chrematistics, whose ultimate purpose is wealth accumulation, can be a useful criterion to assess the ethics of financial market making and the goodness of an innovation as HFT, and how it can serve the common good of society. This approach can be defined as ‘purpose oriented’ or ‘purpose fulfillment’.

scholarly journals Risk and Return in High-Frequency Trading

2018 ◽  
Vol 54 (3) ◽  
pp. 993-1024 ◽  
Author(s):  
Matthew Baron ◽  
Jonathan Brogaard ◽  
Björn Hagströmer ◽  
Andrei Kirilenko
Keyword(s):  
Risk Management ◽  
High Frequency ◽  
Empirical Support ◽  
High Frequency Trading ◽  
Information Channel ◽  
Market Making ◽  
Risk And Return ◽  
Study Performance

We study performance and competition among firms engaging in high-frequency trading (HFT). We construct measures of latency and find that differences in relative latency account for large differences in HFT firms’ trading performance. HFT firms that improve their latency rank due to colocation upgrades see improved trading performance. The stronger performance associated with speed comes through both the short-lived information channel and the risk management channel, and speed is useful for various strategies, including market making and cross-market arbitrage. We find empirical support for many predictions regarding relative latency competition.

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