The Impact of High-Frequency Trading on Market Volatility

Understanding the Flash Crash – state of the art

“…When there are 100 HFTrs operating in the marketplace, the crash probability goes from around 5 per cent (when tick size is 10 cent of a dollar), to around 8 per cent when the size of the tick drops to one cent and up to around 13 per cent when the size of the tick is only 0.001 dollar. Another paper, Virgilio (2016), carries out a computer-based simulation in which a large majority of slow traders and a small number of HF traders operate in the same market. If the market is quiet the interaction between the agents with different speed does not appreciably affect the orderly behavior of the market but in presence of volatile prices, as at the beginning of the Flash Crash, the delay experienced by the slow investors with respect to the fast ones significantly exacerbates volatility.…”

Threshold convergence between the federal fund rate and South African equity returns around the colocation period

“…A handful of empirical works exist which examine the effects of colocation facilities on different stock exchanges and the empirical evidence presented thus far can be best described as inconclusive. On one end, Carrion (2013), Hansbrouck and Saar (2013), and Virgilio (2016) observe that colocation improves stock market performance whereas on the other end, the studies of Zhang (2010), Benos and Sagade (2012) and Riordan et. al.…”