|PDF Title :||High-Frequency Trading|
|Total Page :||322 Pages|
|PDF Size :||2.6 MB|
|PDF Link :||Available|
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High-Frequency Trading : a practical guide to algorithmic strategies and trading systems – Book
When prices of the same financial instrument in different markets diverge for whatever reason, high-frequency latency arbitrageurs jump in and trade away the price discrepancies. For example, HF latency traders sell IBM in the market where the stock is temporarily overpriced, while simultaneously buying it where the stock trades too cheaply.
In the process, the demand and supply produced by the high-frequency traders serve to equilibrate the market prices in previously divergent markets. The high-frequency trader then quickly reverses his position to capture the gain, and investors of all frequencies can be assured that prices on traded financial instruments are consistent across the globe, upholding the Law of One Price.
Latency arbitrage is an example of a trading strategy that is based on taking advantage of high speeds. A question commonly asked by market participants and regulators alike is how much speed is enough? When does the race end? Should there be a limit on how much speed is acceptable in the markets? From the economic point of view, the race for speed will end as soon as there is equilibrium between increasing technological capacity and trading profitability: when an additional dollar spent on technology no longer generates an extra return. Until that time, competition among high-frequency traders will continue to foster innovation in the area of trading.
High-Frequency Trading : a practical guide to algorithmic strategies and trading systems PDF
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