High-Frequency Trading (Hft)
| High-Frequency Trading (HFT) is a type of algorithmic trading that uses high-speed computer networks to transact a large number of orders in an instant. HFT is a controversial practice, with some arguing that it gives an unfair advantage to traders who can use sophisticated software and hardware to execute trades in a fraction of a second. Others argue that HFT provides much needed liquidity to the markets. HFT is a relatively new phenomenon, made possible by advances in technology and the proliferation of high-speed computer networks. In the early days of HFT, a few large firms dominated the market, but the landscape has changed in recent years with the rise of new players and new technologies. HFT strategies can be broadly classified into two categories: latency arbitrage and statistical arbitrage. Latency arbitrage strategies aim to profit from differences in the timing of trades between different markets or exchanges. Statistical arbitrage strategies seek to profit from statistical anomalies in the market. HFT has come under scrutiny in recent years, with some arguing that it contributes to market volatility and increases the risk of market crashes. In 2010, the US Securities and Exchange Commission (SEC) introduced new rules aimed at curbing some of the practices associated with HFT. Despite the controversy, HFT remains a popular trading strategy, with many firms investing heavily in the technology and infrastructure needed to execute trades at lightning speeds. |
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