High-frequency trading as viewed through an electron microscope

Research output: Contribution to JournalReview articleAcademicpeer-review

Abstract

The electron microscope improved our vision by a factor of 1 million, enabling us to see atoms. In this study, I aim for a similar leap by examining trades executed in nanoseconds, a million times more precise than the oft-used milliseconds. This approach allows us to observe asset reallocations among rapid-fire “tradebots,” including those used by high-frequency traders (HFTs). Some 20% of trades occur in submillisecond clusters, which seem to have no price instability. Although submillisecond trade bursts are costly to non-HFTs in terms of adverse selection, these costs can be avoided.

Original languageEnglish
Pages (from-to)24-31
Number of pages8
JournalFinancial Analysts Journal
Volume74
Issue number2
Publication statusPublished - 1 Jan 2018

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High-frequency trading
Traders
Adverse selection costs
Factors
Assets
Reallocation

Cite this

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High-frequency trading as viewed through an electron microscope. / Menkveld, Albert J.

In: Financial Analysts Journal, Vol. 74, No. 2, 01.01.2018, p. 24-31.

Research output: Contribution to JournalReview articleAcademicpeer-review

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