Four years of academic study on HFT yields complicated results

A transatlantic group of researchers has examined a treasure trove of market data to see whether or not high-frequency trading is a necessary component of today’s market structure. The answer is largely ‘yes,’ but with caveats.

Ever since the Michael Lewis book Flash Boys, high-frequency trading (HFT) has held a notorious place in the public imagination. But whether you believe that HFT is crucial for liquidity or a major threat to financial stability, it now represents just over half of all trading volume in the US equity markets, and 24% to 43% in Europe’s.

That’s why the range of practices and strategies caught by the definition of HFT are of increasing interest to academics, who look at HFT market microstructure

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