Abstract
I review the recent high-frequency trader (HFT) literature to single out the economic channels by which HFTs affect market quality. I first group the various theoretical studies according to common denominators and discuss the economic costs and benefits they identify. For each group, I then review the empirical literature that speaks to either the models' assumptions or their predictions. This enables me to come to a data-weighted judgement on the economic value of HFTs.
| Original language | English |
|---|---|
| Pages (from-to) | 1-24 |
| Number of pages | 24 |
| Journal | Annual Review of Financial Economics |
| Volume | 8 |
| DOIs | |
| Publication status | Published - 2016 |
Keywords
- Electronic markets
- High-frequency trading
- Microstructure