The Volume Clock: Insights into the High-Frequency Paradigm
Execution Strategies in Equity Markets
Execution Strategies in Fixed Income Markets
High-Frequency Trading in FX Markets
Machine Learning for Market Microstructure and High-Frequency Trading
A “Big Data” Study of Microstructural Volatility in Futures Markets
Liquidity and Toxicity Contagion
Do Algorithmic Executions Leak Information?
Implementation Shortfall with Transitory Price Effects
The Regulatory Challenge of High-Frequency Markets
High-frequency trading (HFT) has become the norm in equities, futures and options markets, and is quickly becoming commonplace in foreign exchange and commodity markets. The influence of HFT goes far beyond simply “speeding up” markets, but instead changes everything from liquidity provision to order strategies to market stability. For regulators, HFT poses daunting challenges as to how best to oversee markets in which computers generate, route and execute orders. An added complexity is that HFT also ties markets together at lightning speed, meaning that regulatory frameworks cannot simply apply to particular markets or even to specific asset classes. From “flash crashes” to new methods of manipulation, regulators now face a host of problems.
In this chapter, we address the challenges of regulation in a high-frequency world. We discuss in detail regulatory issues created by HFT and how these differ from the problems facing regulators in the past. We provide some specific examples of the problems raised by HFT, and then turn to a discussion of the proposed solutions. Our premise in this chapter is that, just as markets have changed in fundamental ways, so, too, must their regulati