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High-Speed Technology Trading Innovations And Capital Market Performance In Bulgaria

Author

Listed:
  • STEFANOVA, Julia

    (Economic Research Institute, International Economics Department. The Bulgarian Academy of Sciences, Sofia, Bulgaria)

Abstract

The paper analyses the effects of technology-based innovative techniques on Bulgarian capital market -algorithmic trading, in general, and high frequency trading (HFT), in particular - from macroeconomic costs-benefits perspective. Overwhelmingly, empirical studies emphasize that HFT improves the quality of financial markets in terms of increased liquidity, lowered transaction costs and fast price discovery. On the other side, HFT can have potential destabilizing effects, especially on emerging markets, which require increased regulation. Against this background, the European Union (EU) has introduced new regulatory measures targeting HFT, in 2018, which require fast adaptation of all market participants. Empirically, the author argues that there is a relationship between HFT, increased market volatility, fall in trading activity, liquidity and market capitalization on the Bulgarian capital market following the global financial crisis, concluding that the reasons for the fall in capital market activity are not only purely economic. Last, it elaborates on prospective implications for the Bulgarian capital market after the implementation of the new EU regulation targeting HFT.

Suggested Citation

  • STEFANOVA, Julia, 2018. "High-Speed Technology Trading Innovations And Capital Market Performance In Bulgaria," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 22(2), pages 6-37, June.
    • Handle: RePEc:vls:finstu:v:22:y:2018:i:2:p:6-37
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    References listed on IDEAS

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    6. Jiang, Zhi-Qiang & Zhou, Wei-Xing & Sornette, Didier & Woodard, Ryan & Bastiaensen, Ken & Cauwels, Peter, 2010. "Bubble diagnosis and prediction of the 2005-2007 and 2008-2009 Chinese stock market bubbles," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 149-162, June.
    7. Froot, Kenneth A & Scharftstein, David S & Stein, Jeremy C, 1992. "Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," Journal of Finance, American Finance Association, vol. 47(4), pages 1461-1484, September.
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    Cited by:

    1. STEFANOVA, St. Julia, 2019. "Prospects And Challenges Facing Frontier Stock Markets In The Western Balkans: Quo Vadis?," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(2), pages 6-31, June.

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    More about this item

    Keywords

    algorithmic trading; liquidity; volatility; market capitalization; systemic risk; EU integration;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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