The Good, the Bad, and the Ugly of Automated High-Frequency Trading

Journal of Trading, Winter 2013, Vol. 8, No. 1: pp. 58–74

Posted: 21 Jun 2012 Last revised: 22 Dec 2012

Date Written: June 20, 2012

Abstract

This article discusses the pros and cons of automated high-frequency trading (HFT). There appears to be much confusion of whether HFT is 'Good, Bad, or Ugly.' In the terminology of this article, the 'Ugly' category consists mostly of popularized negative writing against HFT appearing in media. The category we label as 'Bad' consists of more detailed research arguments against HFT. Perhaps surprisingly to non-professionals, the 'Good' arguments outweigh the others by a milestone in academic studies. We review the commonly presented arguments as neutrally as possible and attempt to bring some additional insight to the discussion.

Keywords: automated trading, algorithmic trading, high-frequency trading, review

JEL Classification: G00

Suggested Citation

Vuorenmaa, Tommi A., The Good, the Bad, and the Ugly of Automated High-Frequency Trading (June 20, 2012). Journal of Trading, Winter 2013, Vol. 8, No. 1: pp. 58–74. Available at SSRN: https://ssrn.com/abstract=2088099 or http://dx.doi.org/10.2139/ssrn.2088099

Tommi A. Vuorenmaa (Contact Author)

Triangle Intelligence ( email )

Helsinki
Finland
+358-40-7757766 (Phone)

HOME PAGE: http://tommiavuorenmaa.net/

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