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.
|Number of pages||24|
|Journal||Annual Review of Financial Economics|
|Publication status||Published - 2016|
- Electronic markets
- High-frequency trading