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Controlling risk in a lightning-speed trading environment

Author

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  • Carol L. Clark

Abstract

A handful of high-frequency trading firms accounted for an estimated 70 percent of overall trading volume on U.S. equities markets in 2009. One firm with such a computerized system traded over 2 billion shares in a single day in October 2008, amounting to over 10 percent of U.S. equities trading volume for the day. What are the advantages and disadvantages of this technology-dependent trading environment, and how are its risks controlled?

Suggested Citation

  • Carol L. Clark, 2010. "Controlling risk in a lightning-speed trading environment," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Feb.
  • Handle: RePEc:fip:fedhle:y:2010:i:feb:n:272
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    File URL: http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2010/cflmarch2010_272.pdf
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    Cited by:

    1. Ferdinand Fichtner & Kerstin Bernoth & Franziska Bremus & Karl Brenke & Christian Dreger & Burcu Erdogan & Hendrik Hagedorn & Vladimir Kuzin & Katharina Moll & Maximilian Podstawski & Jasper Scheppe &, 2010. "Sommergrundlinien 2010," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 77(26), pages 2-28.
    2. Dorothea Schäfer & Marlene Karl, 2012. "Finanztransaktionssteuer: ökonomische und fiskalische Effekte der Einführung einer Finanztransaktionssteuer für Deutschland; Forschungsprojekt im Auftrag der SPD-Fraktion im Bundestag," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 64, number pbk64, November.
    3. Dorothea Schäfer, 2012. "Financial Transaction Tax Contributes to More Sustainability in Financial Markets," Discussion Papers of DIW Berlin 1198, DIW Berlin, German Institute for Economic Research.

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