Will High-Frequency Trading Practices Transform the Financial Markets in the Asia Pacific Region?

• Main Authors: KAUFFMAN, Robert John, HU, Yuzhou, MA, Dan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2015
• Subjects: Asian region; Equity markets; Financial innovation; Financial IS and technology; Financial markets; High-frequency trading (HFT); Market transformation; Technological innovation; Computer Sciences; Finance and Financial Management; Technology and Innovation
• Online Access: https://ink.library.smu.edu.sg/sis_research/2708; https://ink.library.smu.edu.sg/context/sis_research/article/3708/viewcontent/Kauffman_FinInnovation_2015.pdf
• Institution: Singapore Management University

High-frequency trading (HFT) practices in the global financial markets involve the use of information and communication technologies (ICT), especially the capabilities of high-speed networks, rapid computation, and algorithmic detection of changing information and prices that create opportunities for computers to effect low-latency trades that can be accomplished in milliseconds. HFT practices exist because a variety of new technologies have made them possible, and because financial market infrastructure capabilities have also been changing so rapidly. The U.S. markets, such as the National Association for Securities Dealers Automated Quote (NASDAQ) market and the New York Stock Exchange (NYSE), have maintained relevance and centrality in financial intermediation in financial markets settings that have changed so much in the past 20 years that they are hardly recognizable. In this article, we explore the technological, institutional and market developments in leading financial markets around the world that have embraced HFT trading. From these examples, we will distill a number of common characteristics that seem to be in operation, and then assess the extent to which HFT practices have begun to be observed in Asian regional financial markets, and what will be their likely impacts. We also discuss a number of theoretical and empirical research directions of interest.