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Algorithmic Trading and Challenges on Retail Investors in Emerging Markets

Author

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  • Siyuan Yan

    (School of Business, East China University of Science and Technology, China)

  • Xiaoxu Ling

    (Institute of Accounting and Finance, Shanghai University of Finance and Economics, China)

  • Tian Cao

    (School of Business, East China University of Science and Technology, China)

  • Shengqi Hu

    (School of Business, East China University of Science and Technology, China)

  • Rong Xiong

    (School of Business, East China University of Science and Technology, China)

  • Hongbo Ye

    (School of Business, East China University of Science and Technology, China)

  • Ruihan Zhang

    (School of Business, East China University of Science and Technology, China)

Abstract

Mixed views on automated trading in the extant literature lead to ongoing debates on algorithmic trading (AT) and high-frequency trading (HFT). This study elaborates on the rising ethical issues and regulatory challenges of algorithmic trading and high-frequency trading in emerging markets. While developed capital markets are dominated by institutional investors, emerging markets consist of a large proportion of retail investors who may suffer from aggravated liquidity asymmetry and stock price turbulence due to HFT and AT. Furthermore, we review current regulations of HFT in the U.S. and European markets and provide a framework of regulatory enforcements on AT and HFT for investor protection in emerging markets. This study cautions policymakers in emerging markets that legal and regulatory monitoring of AT and HFT activities is especially necessary.

Suggested Citation

  • Siyuan Yan & Xiaoxu Ling & Tian Cao & Shengqi Hu & Rong Xiong & Hongbo Ye & Ruihan Zhang, 2022. "Algorithmic Trading and Challenges on Retail Investors in Emerging Markets," Journal of Economics, Finance and Accounting Studies, Al-Kindi Center for Research and Development, vol. 4(3), pages 36-41, August.
    • Handle: RePEc:alk:jefas0:v:4:y:2022:i:3:id:3799
    DOI: 10.32996/jefas.2022.4.3.4
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