Going beyond the traditional fundamentals of trading that are covered in academia, Larry Harris, CFA, explores the motivations and goals of the wide spectrum of traders, including profit-motivated traders, utilitarian traders, and the newest breed of traders — those resulting from the growth of electronic markets. Understanding other market participants’ motives allows traders to determine the most opportune time to trade.
Are markets rigged in favor of some investors now that dark pools and high-frequency trading (HFT) are ubiquitous? Ronan Ryan of IEX Group says that harnessing technological advances can help ameliorate market fragmentation and improve the functioning of markets for the benefit of the industry as a whole.
By far the biggest hurdle to handicapping or investing is recognizing when basic conditions have changed, be they rule changes, unexpected weather, personal issues of the professionals, or any number of other fluctuations. From an investment viewpoint, I believe 2015 experienced such cumulative changes that made many of our old approaches less useful.
In the second part of our interview with Nobel laureate Robert Engle, he discusses the application of ARCH models in high-frequency trading and how he thinks risk models should be applied in portfolio management.
High-frequency trading (HFT) accounts for more than half of equity trades in the United States and represents a growing share of traded volume in Europe and Asia. Although there is no sole definition of HFT, it is often thought of as proprietary trading done through powerful IT hardware and programs to get an edge in order execution over very short time intervals.
Recent debate suggests a general lack of good information on high-frequency trading available to the general public. Fortunately, high-frequency trading is an issue that we follow at CFA Institute, and with the goal of providing relevant information in mind, here is a short, curated list of some of our content on the issue — an issue that we think is here to stay for years to come.
In this short video interview, Michael Buhl, shares the perspective of the Vienna Stock Exchange on issues concerning initial public offerings, regulatory developments, dark pools, and high-frequency trading.
In the past few years, trading-volume increases have come predominantly from high-frequency traders, driving exchanges' profit growth and exchanges' attention. In other words, the trading world is now a silicon world to which investors must adapt.
High frequency trading is now the norm, and it is not going away. Continuing to pretend that it has no effect on your investments and on your alpha is at best naïve and at worst ignorant.
Like powerful tools or drugs, high-frequency trading (HFT) is both extraordinarily valuable and incredibly dangerous. Although HFT greatly reduces average trading costs for investors, it also poses systemic risks to the markets, hurts investors through front running, and decreases investor confidence.
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