Question

How do these factors: cause a widespread usage of high frequency trading?

• Increase in competition

• New models for market access

• Fragmented order flow

Answer 1

HFT or High-frequency trading is a technical method which is used by powerful computerised programs to make a large number of orders transact within a fee fraction of seconds. By using complex numbers and algorithms to analyse the global markets, it executes the order based on different market conditions. The traders having the fastest execution speed are considered to be enjoying more this system as compared to traders having slower speeds.

The factors which affect the widespread usage of HFT are:

1. Increased Competition: The increased level of competition and high degree of entry which has made people to establish more and more trading as well as finance business has led the electronic transactions usage widespread all around the world. Now, many organisations have this ability to make the transactions from the consumers anywhere from the world within a fraction of seconds anytime.

2. New Models of Market Access: To access the global markets, companies have different techniques and strategies of how they would make the customer retain. By having more innovation and creative ideas to reach the customers and make them enable the global products, the HFT has been increased making everyone a player in this market having to increase their profits anyhow.

3. Fragmented Order Flow: At last, a fragmented market order is the one in which people numerous no. of centres all around the world where the trading could take place. Example NSE or Sensex etc. Now having so many trading platforms would obviously make the HFT go into a wider platform and thus would increase its role in providing efficient data.