Abstract

http://ssrn.com/abstract=1737887
 
 

References (23)



 
 

Citations (1)



 


 



Fairness in Financial Markets: The Case of High Frequency Trading


James Angel


Georgetown University - Department of Finance

Douglas M. McCabe


Georgetown University - Department of Management

December 21, 2010


Abstract:     
Recent concern over "high frequency trading" (HFT) has called into question the fairness of the practice. What does it mean for a financial market to be "fair"? We first examine how high frequency trading is actually used. High frequency traders are often implementing traditional beneficial strategies such as market making and arbitrage, although computers can also be used for manipulative strategies as well. We then examine different notions of fairness. Procedural fairness can be viewed from the perspective of equal opportunity, in which all market participants are treated alike. The same rules apply to HFT as to other traders. Another approach to fairness is in the equality of outcomes. Many HFT strategies are beneficial to other market participants, so one cannot categorically denounce the practice as unfair. Other strategies, for both high and low frequency trading, are not. It is thus important to distinguish between the technology and the use of the technology to make judgments on fairness.

Number of Pages in PDF File: 25

Keywords: High Frequency Trading, Market microstructure, fairness, regulation, stock markets

JEL Classification: G10, G18, K22

working papers series





Download This Paper

Date posted: January 11, 2011  

Suggested Citation

Angel, James and McCabe, Douglas M., Fairness in Financial Markets: The Case of High Frequency Trading (December 21, 2010). Available at SSRN: http://ssrn.com/abstract=1737887 or http://dx.doi.org/10.2139/ssrn.1737887

Contact Information

James J. Angel (Contact Author)
Georgetown University - Department of Finance ( email )
McDonough School of Business
Washington, DC 20057
United States
202-687-3765 (Phone)
202-687-4031 (Fax)

Douglas M. McCabe
Georgetown University - Department of Management ( email )
3700 O Street, NW
Washington, NY 20057
United States

Feedback to SSRN


Paper statistics
Abstract Views: 3,159
Downloads: 906
Download Rank: 13,244
References:  23
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.422 seconds