The Impact of High-Frequency Trading on Financial Markets
High-frequency traders use complex algorithms and computerized trading to quickly react to market trends that emerge and dissipate within seconds, often employing fiber-optic cables as innovative technology to reduce latency. HFT provides many advantages to market liquidity. Studies have revealed that when fees are added to HFT trades, bid-ask spreads significantly reduce. Impact on Market Efficiency and Liquidity Market efficiency and liquidity are fundamental concepts in financial markets. Market efficiency refers to how closely prices reflect all available information while market inefficiency refers to errors that lead to mispricing. High-frequency…
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