Economics, Econometrics and Finance
8 years ago

High frequency trading boosts market quality by making prices more informative.

European Conference on Information Systems
Technology and market quality: The case of high frequency trading
S. Sarah Zhang, Ryan Riordan

Paper Summary

High frequency trading systems have changed financial markets by impacting market quality. HFT trades are more informed than non-HFT trades for stocks with high market capitalization, making prices more informative. HFT engage in market making strategies, providing liquidity when it is expensive and demanding liquidity when it is cheap.

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