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Computerized and High-Frequency Trading

Author

Listed:
  • Michael Goldstein
  • Michael A. Goldstein
  • Pavitra Kumar
  • Frank C. Graves

Abstract

The use of computers to execute trades, often with very low latency, has increased over time, resulting in a variety of computer algorithms executing electronically targeted trading strategies at high speed. We describe the evolution of increasingly fast automated trading over the past decade and some key features of its associated practices, strategies, and apparent profitability. We also survey and contrast several studies on the impacts of such high-speed trading on the performance of securities markets. Finally, we examine some of the regulatory questions surrounding the need, if any, for safeguards over the fairness and risks of high-speed, computerized trading.

Suggested Citation

  • Michael Goldstein & Michael A. Goldstein & Pavitra Kumar & Frank C. Graves, 2014. "Computerized and High-Frequency Trading," The Financial Review, Eastern Finance Association, vol. 49(2), pages 177-202, May.
    • Handle: RePEc:bla:finrev:v:49:y:2014:i:2:p:177-202
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    File URL: http://hdl.handle.net/10.1111/fire.12031
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    Citations

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    Cited by:

    1. repec:eee:pacfin:v:45:y:2017:i:c:p:91-102 is not listed on IDEAS
    2. Upson, James & Van Ness, Robert A., 2017. "Multiple markets, algorithmic trading, and market liquidity," Journal of Financial Markets, Elsevier, vol. 32(C), pages 49-68.
    3. Craig W. Holden & Stacey Jacobsen & Avanidhar Subrahmanyam, 2014. "The Empirical Analysis of Liquidity," Foundations and Trends(R) in Finance, now publishers, vol. 8(4), pages 263-365, December.
    4. Serbera, Jean-Philippe & Paumard, Pascal, 2016. "The fall of high-frequency trading: A survey of competition and profits," Research in International Business and Finance, Elsevier, vol. 36(C), pages 271-287.
    5. repec:eee:pacfin:v:53:y:2019:i:c:p:186-207 is not listed on IDEAS
    6. O’Hara, Maureen, 2015. "High frequency market microstructure," Journal of Financial Economics, Elsevier, vol. 116(2), pages 257-270.
    7. Manahov, Viktor, 2016. "A note on the relationship between high-frequency trading and latency arbitrage," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 281-296.
    8. repec:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-016-2286-1 is not listed on IDEAS
    9. Francis Breedon & Louisa Chen & Angelo Ranaldo & Nicholas Vause, 2019. "Judgment Day: Algorithmic Trading Around The Swiss Franc Cap Removal," Working Papers on Finance 1912, University of St. Gallen, School of Finance.
    10. repec:eee:riibaf:v:42:y:2017:i:c:p:9-30 is not listed on IDEAS
    11. Henryk Gurgul & Robert Syrek, 2016. "The logarithmic ACD model: The microstructure of the German and Polish stock markets," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 17(1), pages 77-92.
    12. Breedon, Francis & Chen, Louisa & Ranaldo, Angelo & Vause, Nicholas, 2018. "Judgement Day: algorithmic trading around the Swiss franc cap removal," Bank of England working papers 711, Bank of England.
    13. Wang, Qin & Zhang, Jun, 2015. "Does individual investor trading impact firm valuation?," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 120-135.

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