Controlling risk in a lightning-speed trading environment

Carol L. Clark

No PDP-2010-01, Policy Discussion Paper Series from Federal Reserve Bank of Chicago

Abstract: A small group of high-frequency algorithmic trading firms have invested heavily in technology to leverage the nexus of high-speed communications, mathematical advances, trading and high-speed computing. By doing so, they are able to complete trades at lightning speeds. High-frequency algorithmic trading strategies rely on computerized quantitative models that identify which type of financial instruments to buy or sell (e.g., stocks, options or futures), as well as the quantity, price, timing and location of the trades. These so-called black boxes are capable of reading market data, transmitting thousands of order messages per second to an exchange, cancelling and replacing orders based on changing market conditions and capturing price discrepancies with little or no human intervention.

Keywords: Counterfeits; and; counterfeiting (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-mst
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