High-Frequency Trading: Strategies and Implications

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Competitiveness Day 2015Ann-Christina Lange, ph.d., assistant professor

Institut for ledelse, politik og filosofi, Copenhagen Business School, Denmarkhttp://info.cbs.dk/crowds, (ala.mpp@cbs.dk)

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Methods and Data

• A sociological approach to HFT allows us to follow the daily practices and conversations among high-frequency traders (HFTs).

• How professional HFTs (traders and programmers) themselves describe their jobs is highly informative about the reasoning behind their trading strategies – e.g. if they draw implicitly or explicitly on assumptions from crowd psychology.

• Ethnographic observations: HFTs were observed while working at their desk.

• 6 weeks inside a small HFT prop shop close to Wall Street.• One-day visits to 4 other HFT trading firms in New York and New Jersey. • Designing and building black box market automata, supervising and monitoring

algorithms.• The establishment of back-office facilities necessary for HFT activity.

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Order types and HFT strategies

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Order book depth

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Conclusion

The questions a sociological analysis gives rise to:

1.How can we hold an algorithm accountable (when the rational and intentional subject is disappearing)?2.And how can we measure the effect of the interaction between algorithms on the financial markets?

Thank You!

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