High-frequency trading: a survey of market impact

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Publication Type honors thesis
School or College David Eccles School of Business
Department Finance
Faculty Mentor Hank Bessembinder
Creator Carroll, Steven Michael
Title High-frequency trading: a survey of market impact
Year graduated 2012
Date 2012-08
Description The May 6th "flash crash," the result of an overly large sell order in "e-mini" futures on the S&P 500 index, caused American share and future indices to drop approximately 10% in a matter of minutes, only to recover most of the loss by the end of the trading day. At the time, market volatility was already high due to the looming crisis in Greece and such a large trade, being executed without regard to price or time, was left for high-frequency trading firms to pass back and forth. This created volume, but, with little net buying, liquidity was suddenly absent and market depth fell. As a result, the financial industry quickly found high-frequency trading becoming the topic choice with many blaming the crash on the practice. In hindsight, we now know that the "flash crash" was not the result of high frequency trading, but the debates as to the benefit(s) of the practice, and what regulators should allow from it, are still present. The purposes of this research project are to analyze, in context of high-frequency trading, the issue of true liquidity presented to the financial market, to examine potential market manipulation techniques, and to review currently proposed regulation. This thesis begins by providing background information on high-frequency trading, followed by a discussion of the liquidity thought to be provided. I then examine the ability that high-frequency firms have to manipulate the market, through a variety of strategies. Next, I review some of the currently proposed regulatory measures thought to either ensure liquidity or prevent manipulation. I then speculate about the true nature of high-frequency trading as I present my conclusions and recommendations on future regulatory policy responses in this regard.
Type Text
Publisher University of Utah
Subject High-frequency trading; Financial market - United States
Language eng
Rights Management (c) Steven Michael Carroll
Format Medium application/pdf
Format Extent 361,613 bytes
Permissions Reference URL https://collections.lib.utah.edu/details?id=1251374
ARK ark:/87278/s6xh31cj
Setname ir_htoa
Date Created 2016-10-12
Date Modified 2019-07-09
ID 205781
Reference URL https://collections.lib.utah.edu/ark:/87278/s6xh31cj