High-Frequency Trading Synchronizes Prices in Financial Markets

Understand

High-speed computerized trading, often called "high-frequency trading" (HFT), has increased dramatically in financial markets over the last decade.

• In the US and Europe, it now accounts for nearly one-half of all trades.
• Although evidence suggests that HFT contributes to the efficiency of markets, there are concerns it also adds to market instability, especially during times of stress.
• Currently, it is unclear how or why HFT produces these outcomes.