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Front-Running Scalping Strategies and Market Manipulation: Why Does High-Frequency Trading Need Stricter Regulation?
Ist Teil von
The Financial review (Buffalo, N.Y.), 2016-08, Vol.51 (3), p.363-402
Ort / Verlag
Knoxville: Blackwell Publishing Ltd
Erscheinungsjahr
2016
Link zum Volltext
Quelle
EBSCOhost Business Source Ultimate
Beschreibungen/Notizen
Regulators continue to debate whether high‐frequency trading (HFT) is beneficial to market quality. Using Strongly Typed Genetic Programming (STGP) trading algorithm, we develop several artificial stock markets populated with HFT scalpers and strategic informed traders. We simulate real‐life trading in the millisecond time frame by applying STGP to real‐time and historical data from Apple, Exxon Mobil, and Google. We observe that HFT scalpers front‐run the order flow, resulting in damage to market quality and long‐term investors. To mitigate these negative implications, we propose batch auctions every 30 milliseconds of trading.