High-frequency trading (HFT) makes up just a small percentage of the market, despite a common perception that is has become widespread, according to research by brokerage Abel/Noser.
In its monthly liquidity analysis, Abel/Noser found that less than 2% of US equities were impacted by HFT.
The brokerage said that current market volatility meant investors should have greater insight into the real trends impacting the trading environment.
"Often on Wall Street, brokers and other vendors tout the speed at which they can transact equity trades," said Bill Conlin, CEO of Abel/Noser. "With 'nanoseconds' and 'latency' being buzz words, it may lead people to believe that thousands of stocks are trading at the speed of light all day every day, which is simply not the case."
Conlin has urged firms to focus on efficient, cost-effective trade execution rather than low-latency, given the low percentage of equities impacted by HFT.
The liquidity analysis also found very few stocks with an average trade size of more than 400 shares, despite many market participants' belief that far larger numbers trade in big blocks.
Abel/Noser's research also found that approximately 13,000 equity issues were traded in the US in May 2013, including exchange traded funds (ETFs) and individual stocks, with the ten most liquid names accounting for 19% of trading value, while a quarter of trading is made up the 23 most liquid stocks.
SPDR S&P 500 ETF Trust was the most traded, followed by Apple and Citigroup respectively.