I ran across this article today (no longer available) highlighting CME comments regarding a two year study on the effect of high frequency traders on overall market pricing and volatility. After evaluating the last two years worth of trades in their markets the CME states:

“There is considerable evidence that high-frequency traders increase liquidity, narrow spreads and enhance the efficiency of markets.”

Admittedly, CME is not an unbiased source, but that doesn’t automatically invalidate their position.  There have been plenty of strong opinions on both side of this highly politicized issue that have been voiced with NO supporting data, and at a minimum CME should be applauded for performing the study.

The only independent 3rd party study on this topic that I have seen is a paper out of Northwestern University which studied HFT’s impact on the equities markets and more or less concluded the same thing. Using the data observed,  the study concludes that high frequency traders dampen intraday volatility and are not detrimental to non-high frequency traders.

This makes logical sense to me, more volume means more bids and asks which means narrower spreads.

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Larry Neumann

From 2005 to 2017, Mr. Neumann was responsible for all aspects of strategic, corporate, product and vertical marketing. Before Solace, he held executive marketing positions with TIBCO and Oracle, and co-founded an internet software company called inCommon which was acquired by TIBCO. During his tenure at TIBCO, Mr. Neumann played a key role in planning company strategic direction relating to target markets and candidate acquisitions.

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