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High Frequency Trading, a Boon or a Threat?

Author

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  • Michel Dacorogna

    (Prime Re Solutions, Switzerland)

Abstract

In 1986, Olsen & Associates started collecting tick by tick Foreign Exchange data published by Reuters on their Fxfx page. It was the starting of the high frequency adventure in Finance. Today 80% of the trades in the developed markets are due to Hft. They use these data to build sophisticated algorithms for improving their business. In 30 years, the world of trading has completely changed, bringing up questions to wether they still play their roles for price discovery. In this article, we review some of the advances that the high frequency data have brought to light and the approach that we developed over the years to understand the dynamics of financial markets. Is Hft bringing liquidity to the market as many think? Or, does it pose a danger to the stability of system with the development of flash crashes? We answer the question by distinguishing two sorts of Hft: the strategic trading and the informed trading and reflect on the interaction between both

Suggested Citation

  • Michel Dacorogna, 2020. "High Frequency Trading, a Boon or a Threat?," BANCARIA, Bancaria Editrice, vol. 1, pages 89-96, January.
    • Handle: RePEc:ban:bancar:v:1:y:2020:m:january:p:89-96
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    File URL: https://bancaria.it/en/high-frequency-trading-a-boon-or-a-threat
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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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