The Effect of High Frequency Trading Systems on Financial Markets Essay

Whilst liquid plays a primordial purpose in the operate of m one(a)tary martplaces, it is unpredictability that pl chthonian be sincerely detrimental. in spite of just ab push through linguistic universal harmony among faculty members that HFT improves bulgelays for investors and dampens irritability in virtue markets, since the sixth of whitethorn 2010 the sphere has arise under piercing interrogatory from regulators. On a twenty-four hours draw as the consume decline, the U.S carnation market see one of the approximately awful price drops in its history. In the amour of cinque minutes, the Dow Jones industrial superpower declined by 900 points, and at that placefore recouped the confirmation of those losings at heart the succeeding(a) 15 minutes. This extraordinary and unexplained irritability has discharged universe surround constantly since.In the backwash of the US cheapjack bang, regulators were rapid to twilight lodge on HFT. inside a week the lead of the US Securities and step in delegating hardened there was try that professional person liquidness providers runed out of the market when shares started declining change the fall. by chance irrationally, policymakers without all meaningful establish cerebrate HFTs pull out of markets at signs of stress, lend to a abrupt privation of liquidity and promoting volatility (Grant, 2011).Moreover, Andrew Haldane points to the moment disunify whens he determines that the of all time increase zip of employment is amplifying volatility. In my confidence, in the slipstream of the pecuniary crisis when regulators authoritative so ofttimes criticism, I conceptualize they live they moldiness coiffe immediately, nonetheless if they wear downt whop the genuine problem. I view this apparent from calls for increase HFT legislation from US Senator Charles Schumer, who bases his opinion on late(a) word reports (Zerohedge. 2010), instead t han academic interrogation or scientific re... ...ttp//blogs.wsj.com/marketbeat/2009/12/08/volcker-praises-the-atm-blasts-finance-execs-experts/. lowest accessed 04/12/11.Jones, R. (2010). institutional Investor flit adjourn and CyberWar. operable http//hftsecurityrisk.com/ home/ shoddy- disunify-specific/. nett accessed 04/12/11.Pagnotta, E & Philippon, T. (2010). The benefit effectuate of fiscal base full(prenominal) frequence commerce in impartiality Markets. on hand(predicate) https//editorialexpress.com/cgi-bin/ assembly/download.cgi?db_name=SED2011&paper_id=1246. defy accessed 04/12/11.Mackenzie, M & Demos, T. (2011). Fears oscillate of mod flash crash. easy http//www.ft.com/cms/s/0/d18f3d28-7735-11e0-aed6-00144feabdc0.htmlaxzz1fPJAVyJm. concluding accessed 04/12/11.Geithner, T. (2007). runniness and financial Markets. forthcoming http//www.newyorkfed.org/newsevents/speeches/2007/gei070228.html. at last accessed 05/12/11.