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The Trading Mesh

MoneyScience's Blog

The New Investor

March 18, 2013 Comments (0)           

Tom C. W. Lin University of Florida - Fredric G. Levin College of Law Abstract A sea change is happening in finance. Machines appear to be on the rise and humans on the decline. Human endeavors have become unmanned endeavors. Human thought and human deliberation have been replaced by computerized analysis and mathematical models. Technological advances have made finance faster, larger, more global, more interconnected, and less human. Modern finance is becoming an industry in which the main...

High-Frequency Trading and the Execution Costs of Institutional Investors (pdf)

January 24, 2013 Comments (0)           

H/T @CarlCarrie on Twitter Jonathan Brogaard, Terrence Hendershott, Stefan Hunt, Torben Latza, Lucas Pedace, Carla Ysusi FSA OCCASIONAL PAPERS IN FINANCIAL REGULATION While some institutional investors are concerned that high frequency trading increases the cost of investing, others suggest that high frequency trading has been beneficial, for example by creating more accurate and faster pricing of securities and adding liquidity to the market. Understanding the facts, and so which of these...

The Trading Profits of High Frequency Traders

January 17, 2013 Comments (0)           

Via The Big Picture Matthew Baron, Jonathan Brogaard and Andrei Kirilenko Abstract We examine the profitability of high frequency traders (HFTs). Using transaction level data with user identifications, we find that high frequency trading (HFT) is highly profitable: HFTscollectively earn over $23 million in trading profits in the E-mini S&P 500 futures contract during themonth of August 2010. The profits of HFTs are mainly derived from Opportunistic traders, but alsofrom Fundamental...

The Trading Profits of High Frequency Traders | The Big Picture

January 17, 2013 Comments (0)           

Via The Big Picture Matthew Baron, Jonathan Brogaard and Andrei Kirilenko Abstract We examine the profitability of high frequency traders (HFTs). Using transaction level data with user identifications, we find that high frequency trading (HFT) is highly profitable: HFTscollectively earn over $23 million in trading profits in the E-mini S&P 500 futures contract during themonth of August 2010. The profits of HFTs are mainly derived from Opportunistic traders, but alsofrom Fundamental...

High-frequency trading behaviour and its impact on market quality: evidence from the UK equity market

December 3, 2012 Comments (0)           

Evangelos Benos and Satchit Sagade   Abstract We analyse the intraday behaviour of high-frequency traders (HFTs) and its impact on aspects of market quality such as liquidity, price discovery and excess volatility.  For that, we use a unique transactions data set for four UK stocks, over the period of a randomly selected week.  Our data identifies the counterparties to each transaction, enabling us to track the trading behaviour of individual HFTs.  We first find that...

High Frequency Trading and Mini Flash Crashes

November 29, 2012 Comments (0)           

Anton Golub, John Keane, Ser-Huang Poon Abstract We analyse all Mini Flash Crashes (or Flash Equity Failures) in the US equity markets in the four most volatile months during 2006-2011. In contrast to previous studies, we find that Mini Flash Crashes are the result of regulation framework and market fragmentation, in particular due to the aggressive use of Intermarket Sweep Orders and Regulation NMS protecting only Top of the Book. We find strong evidence that Mini Flash Crashes have an adverse...

Financial Markets and High Frequency Trading: An Information Management Perspective

November 28, 2012 Comments (0)           

Babis TheodoulidisUniversity of Manchester - Manchester Business School David DiazUniversidad de Chile - Escuela de Economia y Negocios November 21, 2012 Abstract The advances in trading technologies and networking infrastructures combined with the globalisation and competitive environment of the financial markets has increased the complexity and dynamics of markets making them difficult to understand and has raised a number of issues in relation to the adequacy and appropriateness of the...

Introduction to HFT Scalping Strategies (pdf)

November 12, 2012 Comments (0)           

Haim Bodek and Mark Shaw Decimus Capital Markets, LLC / Haim Bodek ConsultingSM November 2012 This paper summarizes the intentions, key properties and observable effects of the particular class of high frequency trading known as HFT scalping. By using market structure advantages that have in effect circumvented the regulatory framework of Regulation NMS, HFT firms employing these strategies dominate US equity market volumes. This class of HFT trading leads to observable market phenomena such as...

High-Frequency Trading Synchronizes Prices in Financial Markets

November 12, 2012 Comments (0)           

Austin Gerig Abstract High-speed computerized trading, often called "high-frequency trading" (HFT), has increased dramatically in financial markets over the last decade. In the US and Europe, it now accounts for nearly one-half of all trades. Although evidence suggests that HFT contributes to the efficiency of markets, there are concerns it also adds to market instability, especially during times of stress. Currently, it is unclear how or why HFT produces these outcomes. In this paper, I use...

The Diversity of High Frequency Traders

October 8, 2012 Comments (0)           

Björn HagstromerStockholm University - School of Business Lars L. NordenStockholm University - School of Business Abstract The regulatory debate concerning high frequency trading (HFT) emphasizes the importance of distinguishing different HFT strategies and their influence on market quality. Using unique data from NASDAQ OMX Stockholm, we are the first to empirically provide such a distinction for equity markets. Comparing the behavior of market making HFTs to opportunistic HFTs (arbitrage...