The Economics of High-Frequency Trading: Taking Stock

Albert J. Menkveld*

*Corresponding author for this work

Research output: Contribution to JournalReview articleAcademicpeer-review

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 languageEnglish
Pages (from-to)1-24
Number of pages24
JournalAnnual Review of Financial Economics
Volume8
DOIs
Publication statusPublished - 2016

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Keywords

  • Electronic markets
  • High-frequency trading
  • Microstructure

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