20 Facts About High-frequency trading

High-frequency trading is a type of algorithmic financial trading characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools.

HFT uses proprietary High-frequency trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.

High-frequency trading traders move in and out of short-term positions at high volumes and high speeds aiming to capture sometimes a fraction of a cent in profit on every trade.

Substantial body of research argues that HFT and electronic High-frequency trading pose new types of challenges to the financial system.

High-frequency trading has taken place at least since the 1930s, mostly in the form of specialists and pit traders buying and selling positions at the physical location of the exchange, with high-speed telegraph service to other exchanges.

Related searches

Until recently, high-frequency trading was a little-known topic outside the financial sector, with an article published by the New York Times in July 2009 being one of the first to bring the subject to the public's attention.

Many high-frequency firms are market makers and provide liquidity to the market which lowers volatility and helps narrow bid–offer spreads, making trading and investing cheaper for other market participants.

High-frequency trading is quantitative trading that is characterized by short portfolio holding periods.

The success of high-frequency trading strategies is largely driven by their ability to simultaneously process large volumes of information, something ordinary human traders cannot do.

Common types of high-frequency trading include several types of market-making, event arbitrage, statistical arbitrage, and latency arbitrage.

Filter trading is one of the more primitive high-frequency trading strategies that involves monitoring large amounts of stocks for significant or unusual price changes or volume activity.

Tick High-frequency trading often aims to recognize the beginnings of large orders being placed in the market.

High-frequency trading traders take advantage of such predictability to generate short-term profits.

High-frequency trading allows similar arbitrages using models of greater complexity involving many more than four securities.

Separate, "naive" class of high-frequency trading strategies relies exclusively on ultra-low latency direct market access technology.

Economies of scale in electronic High-frequency trading contributed to lowering commissions and trade processing fees, and contributed to international mergers and consolidation of financial exchanges.

CME Group, a large futures exchange, stated that, insofar as stock index futures traded on CME Group were concerned, its investigation had found no support for the notion that high-frequency trading was related to the crash, and actually stated it had a market stabilizing effect.

Various studies reported that certain types of market-making high-frequency trading reduces volatility and does not pose a systemic risk, and lowers transaction costs for retail investors, without impacting long term investors.

High-frequency trading has been the subject of intense public focus and debate since the May 6,2010 Flash Crash.

Currently high frequency High-frequency trading firms are subject to very little in the way of obligations either to protect that stability by promoting reasonable price continuity in tough times, or to refrain from exacerbating price volatility.