4.1 Introduction
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What are the major themes that have been discussed in HFT research field?
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What are the main issues and critique on HFT activity?
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What is the future of HFT research?
4.2 High-Frequency Trading: Definition and Data
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Data for equity trading on NASDAQ;
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Data on trading in the E-Mini;
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Data that CFTC and SEC staff used to prepare their report on the market disruption that occurred in 2010 (Flash Crash);
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A variety of datasets made available to researchers by exchanges and regulators that require proxies to identify HFT activity.
4.2.1 Methodology
4.2.2 Descriptive Statistics
ABS ranking | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Year | Articles | 4* | 4 | 3 | 2 | 1 | Other | Specialist | Specialist (%) | Generalist | Generalist (%) |
2007 | 1 | 1 | 1 | 0.38 | 0.00 | ||||||
2008 | 3 | 2 | 1 | 1 | 0.38 | 2 | 0.75 | ||||
2009 | 1 | 1 | 0.00 | 1 | 0.38 | ||||||
2010 | 2 | 1 | 1 | 1 | 0.38 | 1 | 0.38 | ||||
2011 | 8 | 1 | 5 | 1 | 1 | 6 | 2.26 | 2 | 0.75 | ||
2012 | 21 | 8 | 2 | 3 | 8 | 12 | 4.53 | 9 | 3.40 | ||
2013 | 21 | 2 | 2 | 9 | 2 | 2 | 4 | 16 | 6.04 | 5 | 1.89 |
2014 | 44 | 4 | 23 | 4 | 4 | 9 | 34 | 12.83 | 10 | 3.77 | |
2015 | 29 | 4 | 10 | 7 | 3 | 5 | 19 | 7.17 | 10 | 3.77 | |
2016 | 60 | 2 | 2 | 20 | 12 | 5 | 19 | 38 | 14.34 | 22 | 8.30 |
2017 | 48 | 6 | 1 | 11 | 22 | 4 | 4 | 32 | 12.08 | 16 | 6.04 |
2018 | 27 | 2 | 13 | 8 | 2 | 2 | 18 | 6.79 | 9 | 3.40 | |
Total | 265 | 21 | 5 | 103 | 58 | 24 | 54 | 178 | 67.17 | 87 | 32.83 |
Journals | N | % | ABS ranking |
---|---|---|---|
Quantitative Finance
| 19 | 7.17 | 3 |
Journal of Financial Markets
| 17 | 6.42 | 3 |
Financial Review
| 12 | 4.53 | 3 |
Journal of Financial Economics
| 9 | 3.40 | 4* |
Journal of Banking and Finance
| 9 | 3.40 | 3 |
Journal of Futures Markets
| 7 | 2.64 | 3 |
Journal of Finance
| 5 | 1.89 | 4* |
Journal of International Financial Markets, Institutions and Money
| 5 | 1.89 | 3 |
Annual Review of Financial Economics
| 3 | 1.13 | 3 |
European Journal of Finance
| 3 | 1.13 | 3 |
International Review of Financial Analysis
| 3 | 1.13 | 3 |
Journal of Accounting Research
| 2 | 0.75 | 4* |
Review of Financial Studies
| 2 | 0.75 | 4* |
Journal of Financial and Quantitative Analysis
| 2 | 0.75 | 4 |
Applied Econometrics
| 2 | 0.75 | 3 |
European Financial Management
| 2 | 0.75 | 3 |
Finance and Stochastics
| 2 | 0.75 | 3 |
Journal of Business Ethics
| 2 | 0.75 | 3 |
Journal of Economic Behavior and Organization
| 2 | 0.75 | 3 |
Journal of Economic Dynamics and Control
| 2 | 0.75 | 3 |
Journal of Empirical Finance
| 2 | 0.75 | 3 |
Journal of Financial Econometrics
| 2 | 0.75 | 3 |
Mathematical Finance
| 2 | 0.75 | 3 |
Review of Quantitative Finance and Accounting
| 2 | 0.75 | 3 |
Journal of Accounting and Economics
| 1 | 0.38 | 4* |
Quarterly Journal of Economics
| 1 | 0.38 | 4* |
Review of Economic Studies
| 1 | 0.38 | 4* |
Business Ethics Quarterly
| 1 | 0.38 | 4 |
Journal of Economic Perspectives
| 1 | 0.38 | 4 |
Journal of Economic Theory
| 1 | 0.38 | 4 |
Financial Analysts Journal
| 1 | 0.38 | 3 |
Financial Markets, Institutions and Instruments
| 1 | 0.38 | 3 |
International Journal of Finance and Economics
| 1 | 0.38 | 3 |
Journal of Financial Services Research
| 1 | 0.38 | 3 |
Journal of International Money and Finance
| 1 | 0.38 | 3 |
Articles in ABS 4*, 4, 3 ranked journals | 129 | 48.68 | – |
Articles in ABS 2,1 ranked journals and other journals | 136 | 51.32 | – |
Total articles | 265 | 100 |
4.3 Results
4.3.1 Thematic Analysis
Topics | Frequency | % | Citations | % |
---|---|---|---|---|
Market quality | 58 | 34.5 | 1098 | 91.3 |
Trading strategies and speed | 36 | 21.4 | 259 | 21.5 |
Financial markets structure | 14 | 8.33 | 134 | 11.1 |
Regulation and co-location | 11 | 6.15 | 74 | 6.16 |
Price discovery | 10 | 5.95 | 113 | 9.4 |
Flash crash | 5 | 2.98 | 42 | 3.49 |
Financial disclosure | 3 | 1.79 | 46 | 3.83 |
Transaction costs | 3 | 1.79 | 26 | 2.16 |
Dark market fragmentation | 2 | 1.19 | 11 | 0.92 |
Investors strategies | 2 | 1.19 | 39 | 3.24 |
Order-to-trade | 3 | 1.79 | 9 | 0.75 |
Disposition effect | 1 | 0.6 | 6 | 0.5 |
Hawkes processes | 1 | 0.6 | 6 | 0.5 |
Other | 19 | 11.3 | 238 | 19.8 |
Total | 168 | 100 | 1202 | 100 |
4.3.2 Impact of HFT
Effects on Market Quality
HFT’s Trading Strategies and Speed
Market Structure, Co-location and Regulation After the Flash Crash
4.3.3 HFT Reaction to Corporate Disclosure
4.4 Conclusion and Future Research Directions
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It is not clear if the systemic risk is embedded in electronic trading or really caused by HFT.
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The HFT strategies are still partially undiscovered given that the majority of studies use proxies to detect their activity rather than identifiers. Consequently, the latter information might provide a clear evidence of the real impact of the different trading strategies on market quality.
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Only a few studies highlight the effects of HFT activity around specific events like earnings announcements (Frino et al. 2017), news (Scholtus et al. 2014) or macro-news announcements (Bernile et al. 2016) but how do HFTs react around other specific events like mergers and acquisitions or social media releases? What is the effect of their activity on market quality in such cases?
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How do HFTs react to narrative accounting disclosure? Given that the corporate disclosure is moving towards “machine readable” reports, how can firms anticipate HFT trading strategies at the time of disclosure?