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High‐frequency Trading: Review of the Literature and Regulatory Initiatives around the World
Author(s) -
Chung Kee H.,
Lee Albert J.
Publication year - 2016
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12120
Subject(s) - high frequency trading , volatility (finance) , quality (philosophy) , business , economics , financial economics , algorithmic trading , philosophy , epistemology
This paper provides a review of the literature on high‐frequency trading and discusses various initiatives taken by regulatory authorities around the world to address its potential detrimental effects on market quality and investor welfare. Empirical evidence to date generally suggests that high‐frequency trading has improved market quality during normal times. What is not clear is the role of high‐frequency traders during episodic periods of market crash and extreme volatility. A fruitful area of future research may be a comparative analysis of the role of high‐frequency traders and the efficacy of various regulatory initiatives across periods of varying market conditions.