High Frequency Trading: Why is it done? What are its dangers?

Streaming Media

Document Type

Event

Publication Date

3-26-2012

Abstract

Trading a security like stock or an option only to earn a fraction of a penny on the deal isn’t worth the effort. But multiply such trades tens of thousands of times per day and soon it starts adding up to real money. That is why high-frequency traders do what they do: using sophisticated technological tools to trade securities, but holding them for very brief periods of time—from seconds to hours. Used mostly by larger, diversified firms, high frequency trading (HFT) relies on computerized algorithms to analyze incoming market data and implement proprietary trading strategies.

It is a game of speed that competes for very small, but consistent profits, and it can have a great impact upon the stock market in general. The practice was the focus of “High Frequency Trading: Why is it done? What are its dangers? Can we protect our markets?” a March 26 symposium held at the Columbus School of Law and sponsored by the Securities Law Program and the Securities Law Student Association.

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