High-frequency trading a zero-sum game

The speed increase of stock trading from microseconds to nanoseconds leads to an increase in order cancellations and is otherwise of little value to investors and the general public, a study from University of Illinois has found.

Researchers call these stock exchanges a “zero-sum game” where legitimate traders are essentially subsidising high-frequency traders who cancel orders, reflecting a wealth transfer from low-frequency to high-frequency traders.

Where the majority of trading data were cancellations, it was found that cancelled trades were taking over the system and monopolising resources.

Read more at University of Illinois

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