High-frequency trading (HFT)
High-frequency trading (HFT) is a much discussed algorithmic trading technology allowing securities transactions to be executed via extremely quick high-performance computers. The technology was developed in the course of the progressing technological evolution of the financial markets.
HFT is an important component of electronic markets. HFT participants provide liquidity to markets, dampen volatility and reduce total transaction costs.
HFT also significantly contributes to the reduction of spreads. The resulting improved price quality also benefits companies through lower financing costs. HFT thus plays a major role in efficient and functioning capital markets and has economic benefits.
However, as with other technological innovations, certain risks such as increased volatility, market manipulations or technical errors cannot be ruled out. Deutsche Börse Group effectively counteracts these risks through comprehensive safety measures such as plausibility checks and circuit breakers, thereby safeguarding proper conduct of trading. Additional regulatory measures which contribute to the minimisation of these risks should expressly be supported.
In Germany, HFT has been regulated by the German High-Frequency Trading Act since 15 May 2013. On a European level the issue will be discussed in the context of the revision of the Markets in Financial Instruments Directive (MiFID II).
HFT: the highlighted parts of the value chain are affected
Video: high-frequency trading ... in simple terms