Separating truth and myth in the criticisms of high frequency trading

Abstract

This study delves into the existing literature on high-frequency trading and evaluates its impact on market quality, considering theoretical models and empirical evidence. Navigating diverse perspectives and regulatory intricacies, the research seeks to clarify high-frequency traders' influence on market dynamics, emphasizing both benefits and drawbacks. The findings contribute to a nuanced understanding of the high-frequency trader’s role in equity markets, acknowledging its varied effects on liquidity, efficiency, and competition. Additionally, the study highlights potential policies and regulations to enhance the overall market.