Ninety-six percent of buy- and sell-side companies believe regulators continue to struggle with the implications of high-frequency trading, according to a survey published today by data vendor Thomson Reuters.
Furthermore, concerns among market participants over the negative impact of high-frequency trading are still rife, with 63% of respondents considering the practice to pose a threat to capital market stability and 10% believing a market crash as a result of these trading strategies is imminent. Twenty-eight percent also considered high-frequency trading to increase volatility in the market.
There also seems to be confusion about the definition of high-frequency trading. Of the 100 buy- and sell-side participants questioned, 18% considered high-frequency trading to be intra-day, 17% thought it was sub-minute and 34% thought it was sub-second.
However, the survey also indicated that market participants see the benefits of the much-maligned trading practice, as 70% of respondents felt high-frequency traders make execution easier because they introduce additional liquidity to the market. In addition, 38% considered that the main impact of high-frequency trading is increased market liquidity.
“The trading landscape has changed dramatically and become far more competitive as a growing number of participants implement quant strategies with substantial capital at their disposal,” said Rich Brown, global business manager, machine readable news, Thomson Reuters, in a statement. “The poll indicates that despite recent controversy around high-frequency trading and the large profits made by some firms, it does have positive implications for the market, primarily by providing additional liquidity.”