Research & Insights

Bivium White Paper | June 2014

Bivium White Paper | June 2014

High Frequency Trading: Meditations on the Controversy

Zenas Huang, Analyst at Bivium Capital
Joanna Horton, Global Trading Director at CAPIS

Ever since the genesis of algorithmic trading strategies in the late ’90s, advocated have preached the immense efficiency gains from HFT (i.e. reduce trading costs and higher liquidity). Yet, critics have complained that these benefits are illusory; that HFT practices are, on balance, a bane to markets and operate by unfairly disadvantaging other investors. Naturally, these contradicting replied to the HFT phenomenon lead one to wonder: what exactly is the net effect of HFT? Is the market truly rigged? Which side is correct? What could be the source of this confusion?