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- Title
Front-Running Scalping Strategies and Market Manipulation: Why Does High-Frequency Trading Need Stricter Regulation?
- Authors
Manahov*, Viktor
- Abstract
Regulators continue to debate whether high-frequency trading (HFT) is beneficial to market quality. Using Strongly Typed Genetic Programming (STGP) trading algorithm, we develop several artificial stock markets populated with HFT scalpers and strategic informed traders. We simulate real-life trading in the millisecond time frame by applying STGP to real-time and historical data from Apple, Exxon Mobil, and Google. We observe that HFT scalpers front-run the order flow, resulting in damage to market quality and long-term investors. To mitigate these negative implications, we propose batch auctions every 30 milliseconds of trading.
- Subjects
MARKET manipulation; STRATEGIC planning; SECURITIES trading; INVESTORS; AUCTIONS
- Publication
Financial Review, 2016, Vol 51, Issue 3, p363
- ISSN
0732-8516
- Publication type
Article
- DOI
10.1111/fire.12103