High Frequency Trading: Analyzing a Proposed Ban on Flash Orders

Abstract

High frequency trading (HFT) has dominated the markets in recent years, but academic debate continues about the effects of HFT on elements such as liquidity, market efficiency, and price discovery. Regulators in particular have grown interested in this industry. Here I evaluate a proposed ban on flash orders by the Securities and Exchange Commission (SEC). Though limited in data, I find that academics believe such a ban could improve market fairness but at the cost of reducing liquidity.