High-Frequency Trading and its Impact on Market Liquidity: A Review of Literature

Yıl 2021, Cilt: 5 Sayı: 1, 345 - 368, 26.01.2021

Oğuz Ersan , Nihan Dalgıç , Cumhur Enis Ekinci , Mehmet Bodur

https://doi.org/10.29023/alanyaakademik.799039

Cited By: 1

Öz

High-frequency trading (HFT) has been dominating the activity in developed financial markets in the last two decades. Despite its recent formation, the literature on the impacts of HFT on financial markets and participants is broad. However, there are ongoing debates and unanswered questions within many subtopics. We survey through the research towards HFT effects on liquidity in an attempt to explain the coexistence of evidence regarding both the positive and the negative impacts of HFT. We name two main factors leading to mixed results. Former concerns the negative market conditions such as intraday shocks, through which HFT trading patterns may sharply change. Latter regards the certain characteristics of HFT liquidity provision with the potential to present externalities for the market.

Anahtar Kelimeler

High-frequency trading, HFT, Liquidity, Intraday shocks, Extreme price movements

Destekleyen Kurum

TÜBİTAK

Proje Numarası

218K566

Kaynakça

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