AgPa #25: The Economics of High-Frequency-Trading
The Economics of High-Frequency Trading: Taking Stock (2016)
Albert J. Menkveld
Annual Review of Financial Economics, Vol. 8, 1-24, URL/SSRN
This week’s AGNOSTIC Paper examines once again a somewhat controversial topic: high frequency trading. The (public) image of HFTs is quite mixed with a clear tendency towards negative. However, an open-minded and scientific analysis suggests that we are probably better off with HFTs than without them…
- Trading costs strongly decreased between 2001 and 2011
- HFTs are fast, well-informed, and often market makers
- Order-preying and arm’s races – it’s not all good
- The benefits seem to outweigh the costs