Honors Theses

Date of Award

2016

Document Type

Undergraduate Thesis

Department

Finance

First Advisor

Bonnie Van Ness

Relational Format

Dissertation/Thesis

Abstract

High frequency trading has impacted the American and European financial markets through its advanced algorithms, rapid speed, and preferential treatment from purchasing information and co-location from exchanges. High frequency trading alone is not harmful, but without proper regulations it can hurt the financial markets. In this thesis, I researched implemented regulations, the consequences of those regulations, and pending new regulations. To gather information, I studied relevant research on the topic, including numerous academic articles and books to get a broader view of the issues. Through my research, I have found that previous regulations implemented by American and European regulatory agencies have benefitted high frequency trading firms, and that exchanges, through selling information via co-location, have created an environment that benefits high frequency traders. High frequency trading firms are affecting the market in a negative way by providing a false sense of liquidity while acting as a market makers and by purchasing preferential information and access to the financial markets.

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