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What (If Anything) is Wrong with High-Frequency Trading?

This essay examines three potential arguments against high-frequency trading and offers a qualified critique of the practice. In concrete terms, it examines a variant of high-frequency trading that is all about speed—low-latency trading—in light of moral issues surrounding arbitrage, information asy...

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Detalles Bibliográficos
Autor principal: Mildenberger, Carl David
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer Netherlands 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10390363/
https://www.ncbi.nlm.nih.gov/pubmed/37533566
http://dx.doi.org/10.1007/s10551-022-05145-7
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author Mildenberger, Carl David
author_facet Mildenberger, Carl David
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description This essay examines three potential arguments against high-frequency trading and offers a qualified critique of the practice. In concrete terms, it examines a variant of high-frequency trading that is all about speed—low-latency trading—in light of moral issues surrounding arbitrage, information asymmetries, and systemic risk. The essay focuses on low-latency trading and the role of speed because it also aims to show that the commonly made assumption that speed in financial markets is morally neutral is wrong. For instance, speed is a necessary condition for low-latency trading’s potential to cause harm in “flash crashes.” On the other hand, it also plays a crucial role in a Lockean defense against low-latency trading being wasteful developed in this essay. Finally, this essay discusses the implications of these findings for related high-frequency trading techniques like futures arbitrage or latency arbitrage—as well as for an argument as to why quote stuffing is wrong. Overall, the qualifications offered in this essay act as a counterbalance to overblown claims about trading at high speeds being wrong.
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spelling pubmed-103903632023-08-02 What (If Anything) is Wrong with High-Frequency Trading? Mildenberger, Carl David J Bus Ethics Original Paper This essay examines three potential arguments against high-frequency trading and offers a qualified critique of the practice. In concrete terms, it examines a variant of high-frequency trading that is all about speed—low-latency trading—in light of moral issues surrounding arbitrage, information asymmetries, and systemic risk. The essay focuses on low-latency trading and the role of speed because it also aims to show that the commonly made assumption that speed in financial markets is morally neutral is wrong. For instance, speed is a necessary condition for low-latency trading’s potential to cause harm in “flash crashes.” On the other hand, it also plays a crucial role in a Lockean defense against low-latency trading being wasteful developed in this essay. Finally, this essay discusses the implications of these findings for related high-frequency trading techniques like futures arbitrage or latency arbitrage—as well as for an argument as to why quote stuffing is wrong. Overall, the qualifications offered in this essay act as a counterbalance to overblown claims about trading at high speeds being wrong. Springer Netherlands 2022-05-26 2023 /pmc/articles/PMC10390363/ /pubmed/37533566 http://dx.doi.org/10.1007/s10551-022-05145-7 Text en © The Author(s) 2022 https://creativecommons.org/licenses/by/4.0/Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ (https://creativecommons.org/licenses/by/4.0/) .
spellingShingle Original Paper
Mildenberger, Carl David
What (If Anything) is Wrong with High-Frequency Trading?
title What (If Anything) is Wrong with High-Frequency Trading?
title_full What (If Anything) is Wrong with High-Frequency Trading?
title_fullStr What (If Anything) is Wrong with High-Frequency Trading?
title_full_unstemmed What (If Anything) is Wrong with High-Frequency Trading?
title_short What (If Anything) is Wrong with High-Frequency Trading?
title_sort what (if anything) is wrong with high-frequency trading?
topic Original Paper
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10390363/
https://www.ncbi.nlm.nih.gov/pubmed/37533566
http://dx.doi.org/10.1007/s10551-022-05145-7
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