TY  - BOOK
AU  - Stefan Höppel
PY  - 2014
CY  - Hamburg, Germany
PB  - Anchor Academic Publishing
SN  - 9783954897193
TI  - High Frequency Trading: Economic Necessity or Threat to the Economy?
UR  - https://m.anchor-publishing.com/document/312686
N2  - In the last four decades, technological progress led to an electrification of stock trading systems. It was realized that the profitability of trading strategies could be increased by employing computer algorithms to trade autonomously. This led to the implementation of High Frequency Trading (HFT). Theoretically HFT should increase efficiency in financial markets but it seems that, at least under certain circumstances, it causes market instability. The aim of this paper is to discuss the effect of HFT on market quality and why HFT cannot be fully explained by the neoclassical theory of economics. Therefore, the controversial positions in literature will be presented and discussed. It is especially referred to the influence of HFT on liquidity, price discovery and volatility. Primarily, its negative effect on volatility seems to contravene the modern finance. Furthermore, in the course of this work it will be illustrated that, by employing strict regulation of financial markets, this negative impact cannot be reduced to a sufficient extent in order for HFT to be characterized as market optimizing, according to the neoclassical theory of economics.
KW  - Financial Markets, Regulation, High Frequency Trading, Market Quality, Algorithmic Trading
LA  - English
ER  -