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ALGORITHMIC AND HIGH-FREQUENCY TRADING

Domagoj Sajter orcid id orcid.org/0000-0001-5492-3570 ; Ekonomski fakultet u Osijeku


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Abstract

Today the largest portion of the trading volume at the most developed financial markets in the world – about three quarters – belongs to high-frequency trading. This paper examines this modern (r) evolution, and this historical transition at the largest financial markets in the world, its course and key terms: algorithmic and high-frequency trading. A crucial shift is occurring in the structure of financial markets; with complex and highly sophisticated ICT systems now deeply embodied in their composition. Price inefficiencies migrate into the market microstructure, and are exploited using paradigms which import new terms into classical vocabulary of finance; terms such as low latency, colocations, icebergs, etc., some of which are explained in this paper. Complex issues arise, amongst them the one about bifurcation of market participants. The paper also presents results of the survey carried out among Croatian financial and investment practitioners in early 2011, which shows that until recently Croatian financial experts knew little about these relatively new tendencies.

Keywords

Financial markets; algorithmic trading; high-frequency trading

Hrčak ID:

104541

URI

https://hrcak.srce.hr/104541

Publication date:

28.6.2013.

Article data in other languages: croatian

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