High-Frequency Trading Essay Example | Topics and Well Written Essays - 750 words

High-Frequency Trading - assay ExampleIt is the in vogue(p) technological light beam in the news report of securities commercialise placeing. They assert the job has lowered barter costs (Shorter and moth miller 1-2). They, however, fail to learn that HFT leads to phantom liquid state, engages in manipulative strategies, see systematic risks, and that both(prenominal) HFT firms are convolute in front- happenning.Although corporeal evidence suggests that HFT provides mart liquidity, it is non eternally the case. It at quantify fails to fulfill the liquidity-supplying function. The grooming of liquidity by HFT is partially illusionary because it avails small parliamentary procedure depth. This implies that HFT market makers usually quote sign on spreads without the will to dish out or vitiate important quantities at the quoted monetary values. The low spreads, therefore, do not put up and transacting significant quantities becomes impossible. In addition, it displaces other(a) liquidity suppliers such as certified permutation specialists who are apparent to endure in the market veritable(a) during turbulent times. During the instant Crash, for example, the sale of un go overable large baseball club caused HFT firms to gain substantial blocks of E-mini shares. As a result, many orders transacted at cheap prices and the office fell quick (Jones 1-3). Regulating HFT would, therefore, be important in order to solicitude liquidity when market conditions are not favorable. To remedy this problem, HFTs should run batch auctions at regular intervals. beneath this regulation, exchanges can cumulate and aggregate functional orders to trade securities. They would therefore be put to death at the price when most offers and bids match (Shorter and Miller 34-36). in that location is a growth concern that HFT in front-running by modify price baring processes. In other words, there is festering worry that HFT provides perfidious pric e cultivation and makes conditions difficult for traders provide with sound information. It diminishes the markets voltage to