Synthesising Insights From Empirical Studies In Real-World Market Data To Optimally Measure The Efficiency Of Financial Market By Balancing Innovation And Financial Market Stability In The Era Of High Frequency Trading (HFT)

Dev Sheoran

Vol. 12, Issue 1, Jul-Dec 2021

Abstract:

HFT now defines the new financial markets where trades are executed using algorithms and high-performance computing systems at speeds hitherto unheard of. This transformational force, HFT, has changed the operational landscape of the market, upsetting conventional notions of efficiency. This research paper explores the efficiency of financial markets in the context of HFT, examining its impact on critical parameters such as liquidity, price discovery, and market stability. This paper synthesizes insights from empirical studies and real-world market data to provide a comprehensive understanding of HFT's dual role as both an enhancer and potential disruptor of market efficiency. It also reviews the associated regulatory challenges and presents solutions for mitigating systemic risk. This paper contributes to the ongoing debate about balancing innovation and financial market stability.

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