High Frequency Trading - Are the Risks Being Properly Evaluated?

February 16th, 2014
in econ_news, syndication

Econintersect: There may be risks of high speed trading (HST - aka high-frequency trading) other than market manipulation. HST uses of sophisticated technological tools / computer algorithms to quickly move in and out of market position. Trading speeds have increased from seconds to milliseconds (thousandth of a second) to microseconds (millionth of a second) and are migrating to nanoseconds (billionth of a second). Concerns include the risks to the markets due to the rate large unintended postions can accumulate - as well as feedback loops where a cascade of different HST computers start reacting to movements.

Follow up:

A Chicago Fed study looks at HST and offers several public policy questions for consideration.

[click on image to read the study]

Source: http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2014/cflmarch2014_320.pdf

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