1.
HFT를 둘러싼 토론이 산업과 학문적인 논쟁을 넘어서 정책으로 나아가고 있습니다. 때문에 HFT와 관계가 있는 여러집단들이 다양한 의견을 내놓고 있습니다. 특히 각나라의 거래소들이 HFT와 관련한 실증적인 자료들을 발표하고 있습니다. 흔히 한국의 KRX가 자본시장내에서 독점적인 지위때문에 거래소를 공공기관으로 인식하고 있지만 다른 나라의 거래소들은 일반 금융회사와 다르지 않습니다. 어떤 사안이 발생하였을 때 공공의 이익보다는 거래소에 이익이 되는 방향으로 의사결정을 합니다. 아래 WFE(World Federation of Exchange)가 발표한 HFT도 HFT와 관련한 다양한 견해중 특정한 의견을 지지하고 있습니다.
WFE만이 아니라 법으로 HFT를 규제받고 있는 독일 Eurex도 적극적으로 HFT에 대한 견해를 표명하고 있습니다.
Eurex Exchange’s HFT research – HFT and non-HFT participation during an extreme market situation
Eurex Exchange’s HFT research – A three-dimensional representation of HFT activity
Eurex Exchange’s HFT research – Zooming into HFT participation during micro shocks
What actually is…High Frequency Trading
2.
아래에 소개한 논문과 해설은 TOP Research Papers on High Frequecy Trading & its effects on different exchanges around world에서 가져왔습니다. 저는 논문들의 출처를 찾아서 연결을 했습니다.
1) Ananda, Tanggaarda, Weaver, “Paying for Market Quality” (2009)
Swedish equities, 2002-2004
Designated market makers with affirmative obligations improve market quality, increase market valuation.
2) Bank for International Settlements, “High frequency trading in the foreign exchange market” (2011)
Foreign exchange, 2010 and 2011
“HFT has had a marked impact on the functioning of the FX market in ways that could be seen as beneficial in normal times, but also in ways that may be harmful to market functioning, particularly in times of market stress.”
3) Chae, Wang, “Determinants of Trading Profits: The Liquidity Provision Decision” (2009)
Taiwanese equities, 1997-2002
Absent mandatory obligations, market maker privileges don’t induce market makers to provide liquidity; privileged but unconstrained market makers make profits when demanding liquidity in their own informed trades; unconstrained market makers are informed traders rather than liquidity providers in most scenarios.
4) Easley, Lopez del Prado, O’Hara, “The Microstructure of the Flash Crash” (2011)
U.S. futures, 2010
Unregulated or unconstrained HFT market makers can exacerbate price volatility when they dump inventory and withdraw, flash crashes will recur because of structural issues.
5) Ferguson, Mann, “Execution Costs and Their Intraday Variation in Futures Markets” (2001)
U.S. futures, 1992
Unregulated or unconstrained market makers in the futures market have much more rapid inventory cycles than (regulated) equity market makers, are active rather than passive traders,
and “actively trade for their own accounts, profiting from their privileged access…”6) Frino, Forrest, Duffy, “Life in the pits: competitive market making and inventory control-further Australian evidence” (1999)
Australian futures, 1997
Unregulated or unconstrained market makers are not passive liquidity providers, they behave aggressively like informed traders.
7) Frino, Jarnecic, “An empirical analysis of the supply of liquidity by locals in futures markets: Evidence from the Sydney Futures Exchange” (2000)
Australian futures, 1997
Unregulated or unconstrained market makers demand liquidity to profit from information advantages of privileged access, less likely to supply liquidity in volatile markets, almost as likely to demand as to supply liquidity.
8) Frino, Jarnecic, Feletto, “Local Trader Profitability in Futures Markets: Liquidity and Position Taking Profits” (2009)
Australian futures, 1997
Unregulated or unconstrained market makers are active and informed traders.
9) Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues, “Recommendations
Regarding Regulatory Responses to the Market Events of May 6, 2010” (2011)U.S. futures and equities, 2010
“In the present environment, where high frequency and algorithmic trading predominate and where exchange competition has essentially eliminated rule-based market maker obligations,
liquidity problems are an inherent difficulty that must be addressed. Indeed, even in the absence of extraordinary market events, limit order books can quickly empty and prices can crash simply due to the speed and numbers of orders flowing into the market and due to the ability to
instantly cancel orders.”10) Kirilenko, Samadi, Kyle, Tuzun, “The Flash Crash: The Impact of High Frequency Trading on an Electronic Market” (2010)
U.S. futures, 2010
Unregulated or unconstrained HFT market makers exacerbated price volatility in the Flash Crash, hot potato trading, two minute market maker inventory halflife; “…High Frequency Traders exhibit
trading patterns inconsistent with the traditional definition of market making. Specifically, High Frequency Traders aggressively trade in the direction of price changes…when rebalancing their
positions, High Frequency Traders may compete for liquidity and amplify price volatility.”11) Kurov, Lasser, “Price Dynamics in the Regular and E-Mini Futures Markets” (2004)
U.S. futures, 2001
Unregulated or unconstrained market makers demand liquidity to profit from information advantages of privileged access.
12) Linton, O’Hara, “The impact of computer trading on liquidity, price efficiency/discovery and transaction costs” (2011)
Literature review and survey
“The nature of market making has changed, shifting from designated providers to opportunistic traders. High frequency traders now provide the bulk of liquidity, but their use of limited capital
combined with ultra-fast speed creates the potential for periodic illiquidity”; in “regular market conditions,” liquidity has improved and transaction costs are lower.13) Locke, Sarajoti, “Interdealer Trading in Futures Markets” (2004)
U.S. futures, 1995
Unregulated or unconstrained market makers demand liquidity to manage inventories.
14) Lyons, “A Simultaneous Trade Model of the Foreign Exchange Hot Potato” (1997)
Model derived from empirical studies of 1992 U.S. foreign exchange market.
Demonstrates hot potato trading among unregulated or unconstrained market makers. “Hot potato trading” means cascading inventory imbalances from market maker to market maker in
response to a large order. Hot potato trading explains most of the volume in foreign exchange markets. Hot potato trading is not innocuous – it makes prices less informative.15) Lyons, “Foreign exchange volume: Sound and fury signifying nothing?” (1996)
U.S. foreign exchange, 1992
Unregulated or unconstrained market makers cascade inventory imbalances from one to another, as “…trading begets trading. The trading begotten is relatively uninformative, arising from repeated passage of inventory imbalances among dealers…this could not arise under a
specialist microstructure.”16) Manaster, Mann, “Life in the pits: competitive market making and inventory control” (1996)
U.S. futures, 1992
Unregulated or unconstrained market makers aggressively manage inventory, are “active profit-seeking,” have much shorter inventory cycles than equities market makers.
17) Manaster, Mann, “Sources of Market Making Profits: Man Does Not Live by Spread Alone” (1999)
U.S. futures, 1992
Unregulated or unconstrained market makers demand liquidity to profit from information advantages of privileged access, are “predominant” informed traders.
18) Panayides, “Affirmative obligations and market making with inventory” (2007)
U.S. equities, 1991 and 2001
Mandatory market maker obligations reduce volatility.
19) Silber, “Marketmaker Behavior in an Auction Market: An Analysis of Scalpers in Futures Markets“, (1984)
U.S. futures, 1982-1983
Unregulated or unconstrained market makers profit from the information advantages of privileged access, two minute inventory cycles.
20) Smidt, “Trading Floor Practices on Futures and Securities Exchanges: Economics, Regulation, and Policy Issues” (1985)
Literature review and survey
On futures exchanges, inventory imbalances among unregulated or unconstrained market makers create “potentially unstable” markets and price overreactions during “scalper
inventory liquidation.”21) United States Commodity Futures Trading Commission and Securities and Exchange Commission, “Findings Regarding the Market Events of May 6, 2010” (2010)
U.S. futures and equities, 2010
Unregulated or unconstrained HFT market makers exacerbated price volatility in the
Flash Crash, hot potato trading.22) United States Federal Trade Commission, “Report of the Federal Trade Commission on the Grain Trade,” Volume 7 (1926)
U.S. futures, 1915-1922
Unregulated or unconstrained market makers both cause and exacerbate price volatility; “The scalpers who operate with reference to fractional changes within the day may have a stabilizing effect on prices so far as such changes with the day are concerned, but when the market turns
they run with it, and they may accentuate an upward or downward movement that is already considerable.”23) Van der Wel, Menkveld, Sarkar, “Are Market Makers Uninformed and Passive? Signing Trades in the Absence of Quotes” (2009)
U.S. futures, 1994-1997
Unregulated or unconstrained market makers demand liquidity for a substantial part of the day and are active and informed speculators.
24) Venkataraman, Waisburd, “The Value of the Designated Market Maker” (2006)
French equities, 1995-1998Designated market makers with affirmative obligations improve market quality, increase market valuation.
25) Wang, Chae, “Who Makes Markets? Do Dealers Provide or Take Liquidity? ” (2003)
Taiwanese equities, 1997-2002
Absent mandatory obligations, market maker privileges don’t induce market makers to provide liquidity; they derive profits from their own informed trades; “While dealers may be meant to
perform the socially beneficial function of liquidity provision, the institutional advantages granted to them also give the ability to act as super-efficient proprietary traders if they choose to.”26) Working, “Tests of a Theory Concerning Floor Trading on Commodity Exchanges” (1967)
U.S. futures, 1952
Unregulated or unconstrained market makers are also trend traders, profiting from the information advantages of privileged access; they can trade aggressively, especially when the market goes against the firm; inventory cycles of “minutes”; trend trading accelerates price changes (but may moderate extremes).
27) Zigrand, Cliff, Hendershott, “Financial stability and computer based trading” (2011)
Literature review and survey
Self-reinforcing feedback loops in computer-based trading can lead to significant instability in financial markets; market participants become inured to excessive volatility in a cultural “normalization of deviance” until a large-scale failure occurs; research to date has not shown a persistent increase in market volatility, but HFT research is nascent.
