A Material Sociology of High-Frequency Trading

Research project

Principal investigator

Donald MacKenzie

Research team

Overview

Ultrafast, automated high-frequency trading or HFT is a vital part of today's financial markets. You can view a video above of Donald describing our research to a Chicago traders’ news service, or read our working papers below.

Donald's book on HFT, Trading at the Speed of Light: How Ultrafast Algorithms are Transforming Financial Markets (also available on audiobook) was published by Princeton University Press in 2021. You can read an early review by Diane Coyle.

Project goals

Thirty years ago, most financial trading took place either face-to-face or on the telephone. Now, trading is mainly electronic, and, increasingly, takes place among computer algorithms rather than directly involving human beings.

Our project is examining how this epochal change gave rise to high-frequency trading, an astonishing high-tech domain in which time is measured in nanoseconds. In a nanosecond (a billionth of a second), the fastest signal – light in a vacuum – can travel only around 30 cm, or roughly a foot. Getting as close as possible to the speed of light has become an important practical matter in HFT.

Among the issues we are examining are how HFT algorithms make their decisions to buy and sell, the very big differences among markets in the extent of HFT within them, and the role of government regulation in the evolution of HFT.

We are also investigating how HFT compares to other broadly similar activities, such as cryptocurrency ‘mining’ and the ‘real-time bidding’ that plays such an important role in today's digital advertising.

Our project, which runs from January 2018 to December 2022, is funded by the UK Economic and Social Research Council.

Our research in the news

Donald interviewed by Meyrick Chapman for Exorbitant Privilege podcast: link to recording
Donald’s invited presentation to Peking University School of Journalism & Communication, Nov 2022: video
Donald invited to talk about the research in the Catalan Society for the History of Science and Technology's seminar series, Technology and Capitalism: YouTube Video of talk.
Project principal investigator Donald MacKenzie is named one of the world's 25 most influential sociologists.
Article on our HFT research in Advisor Perspectives
Radio interview with WBEZ Chicago
Podcast: Donald's Interview with WTFinance
Interview with journalist Katherine Heires
Interview with New Money Review
Podcast interview in Maxcamthropod series
An article in the Financial Times by journalist Gillian Tett (FT subscription is required for access)
An interview on a programme in BBC Radio 4’s The New Age of Capitalism, on high-frequency trading

How we're collecting data

The primary way in which we are collecting data is by interviewing people who work in high-frequency trading and analogous activities or for electronic trading venues, as well as those who have other market roles (for example, as broker-dealers), who regulate trading and who supply trading firms with software, hardware and communication links.

We are also taking part in events such as industry meetings and training courses.

Confidentiality

We will fully respect the anonymity and confidentiality of participants in the study, as well as the commercial confidentiality of the firms for which they work -when, for example, we speak to people in automated trading firms, we are careful never to probe for ‘secret sauce’.

Those who take part in this study are guaranteed that nothing will ever be attributed to them or to their organisations in anything we write or say, unless they give us their explicit permission to do so.

For more information, see our Participant Information Sheet.