High Frequency Trading ( Hft )

862 WordsNov 18, 20154 Pages
High-Frequency Trading (HFT) are powerful computers that transmit a large number of orders at fast speeds. It uses sophisticated algorithms to assess multiple markets by executing orders based on market conditions to achieve the best possible price. In addition to this, it might split the orders into smaller pieces and run at different times. In particular, traders that have the fastest execution speed tend to be more profitable than traders with a slower execution speed. According to NASDAQ, "It is estimated that computer-backed high-frequency trading is currently driving 50 percent of stock trading volume in the U.S." So, how does HFT impact the markets? It affects the market by liquidity, market efficiently, reducing costs, and profitability. With this in mind, let 's take a deeper look into these arguments that is for HFT. • Liquidity Investors must have confidence in putting their money into the stock markets. The market has to function properly, and there must be an adequate amount of liquidity. It is important for investors to put their money into the market where they have the ability to sell their investment at a later time. HFT strategies improve market liquidity. In fact, the amount and volume of trades that use this approach will ensure a liquid market. Furthermore, HFT traders are the makeshift market makers who will buy and sell when no one will. " As HFT trades can make up as much as 70% of the trading volume in a given day, investors have a greater ability
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