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Informative Article | Financial Management | India | Volume 9 Issue 1, January 2020
Market Microstructure of High-Frequency Trading (HFT) in Derivatives: Strategies, Impact, and Regulatory Implications
Abstract: High-frequency trading (HFT) has become a dominant force in modern financial markets, particularly in the derivatives space. Utilizing sophisticated algorithms and cutting-edge technology, HFT firms engage in rapid-fire trading, seeking to exploit fleeting market inefficiencies. This paper examines the market microstructure of HFT in derivatives markets. It delves into the key strategies employed by HFT firms, analyzes their impact on market dynamics like liquidity, volatility, and price discovery, and explores the complexities of the regulatory landscape surrounding HFT. The paper offers a critical assessment of the arguments both for and against increased HFT regulation, ultimately providing insights into the evolving relationship between technology, market structure, and regulatory oversight in the derivatives market.
Keywords: High-Frequency Trading (HFT), Derivatives Markets, Liquidity, Regulation Market Microstructure Market Manipulation
Edition: Volume 9 Issue 1, January 2020,
Pages: 1924 - 1927