High-frequency trading (HFT)High-frequency trading (HFT) is a form of automated tradin... More is a form of which uses algorithms to identify opportunities and rapidly execute a large number of .
HFT is sometimes also referred to as “equityWhat is equity? In accounting and finance, equity is the r... More marketWhat are value stocks? A value company is a company that app... More making”.
How does HFT work?
HFT trading platforms can analyse many simultaneously and are programmed to process trades if market conditions are appropriate. The technology used is extremely advanced and involves incredibly fast processing speeds.
HFT firms can execute a trade in microseconds and can handle thousands of transactions in a single day, often making a small amount of profit on each.
HFT firms generally compete against each other as opposed to longer-term .
The impact of high-frequency trading
HFT has been going on since at least 1999, but its popularity increased dramatically between 2005 and 2009.
Some experts say that HFT can add market and lower , consequently improving trading conditions for other market participants. A number of even provide financial incentives for this liquidityWhat is market liquidity? The term liquidity of a market... More provision.
However, others have concerns about the risks of HFT and the way in which it can affect the stability of markets. They suggest that firms specialising in HFT should be subject to tighter regulation and risk controls.
In 2010 HFT firms accounted for over 60% of all US equity trading volumeWhat is the trading volume? In trading, volume refers to t... More, but that number fell to about 50% in 2012, with a reported overall reduction in profits.
