Views on the integrity of global capital markets
18 December 2015

Are “Lit” Trading Venues Too Toxic for Average Investors? Is HFT Flash Crash Culprit?

Posted In: Market Structure

What effect does “adverse selection” (the risk that a limit order gets picked off by a more informed trader) have on different market participants? Are “lit” trading venues too toxic for average investors? Was high-frequency trading (HFT) to blame for recent flash crashes?

Those were just some of the timely issues covered during my recent #CFAHFT Twitter chat with Dennis Dick, CFA, proprietary trader and head of equity market structure at Bright Trading. We set out to examine the nature of a modern equity market that is dominated by HFTs, and ultimately whether it’s good for investors.

Representatives from both the buy and sell side and pro- and anti-HFT camps participated in the chat, which covered a new CFA Institute study that examines the characteristics of liquidity in equity markets and the issue of “adverse selection.“

For more from the recent Twitter chat, see social media highlights below.


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Image credit: iStockphoto.com/Nikada

About the Author(s)
Sviatoslav Rosov, PhD, CFA

Sviatoslav Rosov, PhD, CFA, is an analyst in the capital markets policy group at CFA Institute. He is responsible for developing research projects, policy papers, articles, and regulatory consultations that advance CFA Institute policy positions, focusing on market structure and wider financial market integrity issues.

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