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) has just been published by Princeton University Press. You can read an early review by Diane Coyle.
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 2021, is funded by the UK Economic and Social Research Council.
Our research in the news
- 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.
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.
Project Working Papers
Opinion: High-frequency trading brings real benefits but still could wind up hurting the stock market – Here's why, Donald MacKenzie, Dow Jones MarketWatch, June 2021.
Market Devices and Structural Dependency: The Origins and Development of 'Dark Pools' Donald MacKenzie, May 2019.
How Fragile Is Competition in High-Frequency Trading? Donald MacKenzie, March 2019, published on the Tabb Forum.
How Algorithms Interact: Goffman's 'Interaction Order in Automated Trading, Donald MacKenzie, June 2018
Material Signals: A Historical Sociology of High-Frequency Trading, Donald MacKenzie, May 2018, published in the American Journal of Sociology
A Material Political Economy: Automated Trading Desk and Price Prediction in High-Frequency Trading, Donald MacKenzie, November 2016
Header photo shows microwave towers of the kind used in high-frequency trading. Image courtesy of Bird&Renoult.