High Frequency Trading, a Boon or a Threat?

Michel Dacorogna

BANCARIA, 2020, vol. 1, 89-96

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

JEL-codes: F10 G10 G12 (search for similar items in EconPapers)
Date: 2020
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