High Frequency Traders’ Claims Refuted by Studies

Advocates of high frequency trading (HFT) like to point to the advantages it brings in terms of market efficiency.

The Futures Industry Association Principal Traders Group, a trade association, which includes high frequency traders, said in a September statement that “as markets have become more automated and competitive … trading costs are lower, markets are deeper and more liquid, and prices better reflect information about the value of stocks and commodities.”

But recent testimony before the US Senate Banking Committee and a new study by the Federal Reserve Bank of Chicago both paint HFT in a rather different light.

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