Free

High frequency trading - Research Paper Example

Comments (0) Cite this document
Summary
For the average investor, there are concerns that HFT is making things difficult and volatile for them instead of leveling the playing field for everyone (Aldridge 60). The problem arises…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.6% of users find it useful
High frequency trading
Read TextPreview

Extract of sample "High frequency trading"

Module Demerits of High Frequency Trading Those that get involved in high-frequency trading are aware of the impact it has on them. For the average investor, there are concerns that HFT is making things difficult and volatile for them instead of leveling the playing field for everyone (Aldridge 60). The problem arises when companies have to continue making use of their complex computerized algorithms to meet the main demands of the investors. They can quickly identify the ability of an individual wanting to buy shares, and buy them ahead of the trader and sell at higher prices (Kirilenko, Kyle, Samadi & Tuzun 22).
Another disadvantage that faces the average investor is the ability to withdraw and initiate thousands of trades at multiple pricing points within the same period. This makes it difficult to understand what is or is not legit (Petajisto 273). Further, the ability of these programs coming up with the upper buy range and lower sell range can create security for one individual and insecurity for the other. It becomes very difficult to have the average investor coming up with a substantial amount because the investors privy with HFT could sell below the limit forcing an individual to pay more compared to normal circumstances. The fact that they attain the information seconds earlier allows them to have an edge that disadvantages the investors, exposing them to risks (Aldridge 65; Kirilenko, Kyle, Samadi & Tuzun 25).
Many will look at this from the angle of having more to do with one’s trading sessions, but the unleveled playing field makes it worse. The securities exchange should rein on such behaviors and provide the investors with a fair chance of meeting these ideals.
Regulating HFT
Regulations are necessary in this sector. Investors need to operate within similar platforms as a way of encouraging them to make better use of the skills present. One thing that can be done is creating stronger controls that will create safety nets around the trading options (Aldridge 67). This will enable the government to provide the stock exchanges with the required platforms that will help reduce the market instability through the proper utility of the incentives provided. Markets will also benefit a lot if information was not disseminated before hand, allowing all traders to benefit from what they possess, rather than generate new platforms that do not define the market as a whole (Petajisto 274). Ideally, the traders will have to get clearing before some of the tools can be used, something the government needs to pay great attention to. By limiting the risks, it is very easy to avoid any form of unfair advantage to a few of the investors while others are affected by the fast trading methods (Aldridge 68).
The government needs to play a huge role in defining the risk controls that ought to define the participation of all trading stockbrokers (Aldridge 70). The stringent process of defining and determining the patterns of trade across the country need to be similar to avoid having difficulties in dealing with the competition. Promotion of robust internal risk management attributes will be essential in creating confident controls over the algorithms and making strategic inputs protect regular investors (Kirilenko, Kyle, Samadi & Tuzun 32).
Works Cited
Aldridge, Irene. High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems. New York: Wiley, 2009. Print.
Kirilenko, Andrei; Albert S. Kyle, Mehrdad Samadi & Tugkan Tuzun. The Flash Crash: The Impact of High Frequency Trading on an Electronic Market. Boston, MA: Social Science Research Network, 2014. Print.
Petajisto, Antti. The index premium and its hidden cost for index funds. Journal of Empirical Finance 18 (2011): 271–288. Print. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“High frequency trading Research Paper Example | Topics and Well Written Essays - 500 words”, n.d.)
High frequency trading Research Paper Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/finance-accounting/1698407-high-frequency-trading
(High Frequency Trading Research Paper Example | Topics and Well Written Essays - 500 Words)
High Frequency Trading Research Paper Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/finance-accounting/1698407-high-frequency-trading.
“High Frequency Trading Research Paper Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/finance-accounting/1698407-high-frequency-trading.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF High frequency trading

Frequency Distributions

...not understand as well (scores clustering near the lower end of the scale). By the second week, the two groups of students did combine into one unified group; but the majority still did have trouble grasping the concepts in class. A minority of students did far better than the rest and got high score; while the majority still scored towards the lower side of the scale. Scores from the third week show that the class as a whole was starting to make sense of the concepts being taught, and were improving in their understanding. This can be understood from the movement of the majority of the scores from below the 50% mark to very close to the 50% scores point. By now, about half the class understood the concepts reasonably...
2 Pages(500 words)Essay

Role of high frequency trading in modern financial markets

...?Table of Contents Table of Contents Introduction 2 Modern financial Markets 3 Electronic Trading & Technological Shifts in Trading 5 High Frequency Trading 7 Strategies used by HFT firms 9 Interaction of Humans and Algorithms 10 Impact on the Liquidity, price, transaction costs & Efficiency 12 Financial instability 15 Contribution to Financial Markets 17 Criticism 17 Recent Moves by Regulators 20 Conclusion 21 Works Cited 22 Introduction Over the period of time, international financial markets have advanced to a level where rapid innovation has taken place. Financial Institutions have developed the tools and techniques with the help of technology which...
23 Pages(5750 words)Essay

High Frequency Oscillatory Ventilation

...Prof’s High Frequency Oscillatory Ventilation (HFOV) The lungs are just one part of the respiratory system and the site of gas flow and exchange. The primary goal of the respiratory system is to deliver oxygen to the blood and to remove carbon dioxide from the blood to the environment. Sometimes, for a variety of causes, the lungs will fail. At this point, the person will have two options: die, or be temporarily transformed into a cyborg. Those who choose the latter are placed on a mechanical ventilator, which allows control over the pressure, volume, and rate of air delivered to the alveoli. The volume of air in a single breath is known as the "tidal volume." Conventional ventilators can have a harmful...
30 Pages(7500 words)Essay

Frequency Distribution

...1. Based on the Frequency distribution and the Histogram chart, the frequency of the data is centered at 43 53 which is covers the statisticalmean of 1.48. The distribution looks a normal bell curve with high peak; however, the data has a longer tail starting from 2.03 up. The frequency distribution tells us that the nurses to bed ratio in the US is centered at 1.43-1.53 and a few 2.0 nurses to bed ratio. Bin Frequency 0.93 1 1.03 1 1.13 2 1.23 4 1.33 5 1.43 10 1.53 5 1.63 3 1.73 3 1.83 1 1.93 0 2.03 2 2.13 1 More 2 2. Based on the Frequency distribution and the Histogram chart, the frequency of the data is centered at...
5 Pages(1250 words)Essay

Frequency Distribution

...Statistics Inserts His/Her Inserts Grade Inserts 1st June, Overview Frequency distributionsare used in analyzing patterns in data that are measured in different tasks undertaken under project management. In cases where several people undertake similar tasks graphs can be used in measuring work output and quantity. In a project it might be difficult to measure the output of workers or employees generally. However, with the use of frequency distributions we can easily get exact figures for every task or data collected for each and every employee (Lewis, 2006). Making use of frequency distribution tools like graphs and tables we are able to measure and reveal exact values and outliers. A...
1 Pages(250 words)Assignment

Trading Techniques

...Trading Techniques Contents Contents 2 Trading Techniques 3 References 5 Trading Techniques The trading techniques in financial markets are explainedas the plan for attaining maximum return through purchase or sale of stocks and securities by taking long or short positions in the market. The trading of shares and stocks are done either manually or in an automated fashion. The manual trading requires higher level of skills and trading proficiency for generating higher return from the trade. The various trading techniques that are adopted in the financial markets include the...
2 Pages(500 words)Essay

Frequency Distributions

...salaries are summarized in the frequency distribution below. Salary Number of Employees 5,001–10,000 8 10,001–15,000 12 15,001–20,000 20 20,001–25,000 17 25,001–30,000 13 a. Find the standard deviation. b. Find the variance. Ans: standard deviation is 1.252 Variance is 1.568 6.  Calculate the mean and variance of the data. Show and explain your steps. Round to the nearest tenth.        14,   16,   7,   9,   11,   13,   8,   10 Ans: Mean is 11 and Variance is 8.5. The steps are shown below: a) calculate the mean i.e sum(all obsv)/no.of obsv. (14+16+7+9+11+13+8+10) / 8 b) calculate ( obsv-mean )^2 as shown below c) Calculate sum of (obsv-mean) ^2 and divide it by no of obsv to get the variance. i.e. 68/8 7. Create a...
2 Pages(500 words)Assignment

FREQUENCY DISTRIBUTIONS

...Introduction to Probability Brandon M. Blackmon Trident International Frequency distribution table Frequency distribution tables present data in the form of values and their frequencies. It helps in the calculation of, measures of central tendencies, for example, the mean, as well as, measures of variations including the range, standard deviation, and variance. To measure the standard deviation and the variance, one has to calculate the average of standard deviations of all the values from the mean. The below frequency distribution table shows the collected data relating to the amount of time spent on physical fitness training every day, in the form of minutes, and the...
3 Pages(750 words)Assignment

Explanation of High-Frequency Trading

... Explanation of high-frequency trading and an evaluation of its implications for markets and shareholders of equity markets Explanation of high-frequency trading Today’s equity markets operate in a highly sophisticated computerised environment that uses varied approaches and technological trading tools (Narang, 2013, p. 23). High-frequency trading (HFT) uses algorithmic trading tools to enable traders to move in and out of equity positions in seconds or fractions of a second (Lattemann et al, 2012, p. 97). HFT uses algorithms to identify fleeting moves...
11 Pages(2750 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic High frequency trading for FREE!

Contact Us