High-Frequency Trading and Its Role in Fragmented Markets
Proceedings of the 23rd European Conference on Information Systems (ECIS 2015), Münster, 2015
18 Pages Posted: 29 Apr 2015 Last revised: 8 Apr 2016
Date Written: April 28, 2015
The ﬁnancial services industry is among the leading industries in IT-spending. Still, little research exists which investigates how IT inﬂuences the ﬁnancial services sector. Against this background, we study how a technology which emerged within the last years affects securities trading: High-Frequency Trading (HFT). Hereby, we focus on HFT and its impact on market efﬁciency. On the basis of a long-term analysis, we ﬁnd that HFT decreases price dispersion among two distant markets. Analyzing the introduction of the German HFT Act, we further observe that the price dispersion between two leading trading venues for German blue chip securities increased. We conclude that HFT increases market efﬁciency in the European market landscape by transmitting information between distant markets.
Keywords: German High-Frequency Trading Act, Fragmentation, High-Frequency Trading, Market Efﬁciency, Securities Trading
JEL Classification: G12, G14, G18, G28
Suggested Citation: Suggested Citation