Study disproves commonly held negative perceptions of HFT
The report, entitled Foresight: The future of computer trading in financial markets, was commissioned by the UK Government Office for Science. It examines the effect of computer-based trading (CBT) on financial markets.
The report claims CBT has many positive effects, a finding that could come as a surprise, says Jean-Pierre Zigrand, reader in finance at the London School of Economics and part of the group that oversaw the project. Previous assessments of the effect of high-frequency trading in particular have been negative:the Bank of England’s head of financial stability, Andrew Haldane, linked it to growing systemic risk in 2011, and it wascited as one of the causes of the flash crash in May 2010.Evolatile, that CBT is wrong,” Zigrand argues. “We had to try to commission papers that were able to control for the financial crisis to see what the net effect of CBT is.