We're using cookies, but you can turn them off in your browser settings. Otherwise, you are agreeing to our use of cookies. Learn more in our Privacy Policy

Bridge over ocean
26 February 2018 Financial Analysts Journal Volume 74, Issue 2

High-Frequency Trading as Viewed through an Electron Microscope

  1. Albert J. Menkveld

The electron microscope improved our vision by a factor of 1 million, enabling us to see atoms. In this study, I aim for a similar leap by examining trades executed in nanoseconds, a million times more precise than the oft-used milliseconds. This approach allows us to observe asset reallocations among rapid-fire “tradebots,” including those used by high-frequency traders (HFTs). Some 20% of trades occur in submillisecond clusters, which seem to have no price instability. Although submillisecond trade bursts are costly to non-HFTs in terms of adverse selection, these costs can be avoided.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content