The regulatory, technology and market ‘dark arts trilogy’ of high frequency trading: a research agenda

Abstract : Computerization has transformed financial markets with high frequency trading displacing human activity with proprietary algorithms to lower latency, reduce intermediary costs, enhance liquidity and increase transaction speed. Following the “Flash Crash” of 2010 which saw the Dow Jones Industrial Average plunge 1000 points within minutes, high frequency trading has come under the radar of multi-jurisdictional regulators. Combining a review of the extant literature on high frequency trading with empirical data from interviews with financial traders, computer experts and regulators, we develop concepts of regulatory adaptation, technology asymmetry and market ambiguity to illustrate the ‘dark art’ of high frequency trading. Findings show high frequency trading is a multi-faceted, complex and secretive practice. It is implicated in market events, but correlation does not imply causation, as isolating causal mechanisms from interconnected automated financial trading is highly challenging for regulators who seek to monitor algorithmic trading across multiple jurisdictions. This article provides information systems researchers with a set of conceptual tools for analysing high frequency trading.
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Journal of Information Technology, Palgrave Macmillan, 2017, 32 (2), pp.111 - 126. 〈10.1057/s41265-016-0025-3〉
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Soumis le : mardi 6 juin 2017 - 13:13:20
Dernière modification le : mercredi 7 juin 2017 - 01:06:48

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Wendy L. Currie, Jonathan J. M. Seddon. The regulatory, technology and market ‘dark arts trilogy’ of high frequency trading: a research agenda. Journal of Information Technology, Palgrave Macmillan, 2017, 32 (2), pp.111 - 126. 〈10.1057/s41265-016-0025-3〉. 〈hal-01533358〉

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