PDSnet Glossary

Term

Categories

Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

Versions

Name	synonyms = 1, variations = 2, abbreviations = 3

Publish: (0 = no, 1 = yes)

Definition

High frequency trading (HFT) consists of making large numbers of trades through a very fast computer that is connected directly to the stock exchange. These are program trades which are designed to take advantage of small discrepancies between markets in the same share (arbitrage) or based on a particular strategy. It is estimated than more than half of the trades done on Wall Street today are HFT. The margins on HFT are very thin and depend on how quickly the trades can be placed and executed. Most advanced stock exchanges offer a co-location facility which allows such trades to be executed a few feet away from the exchange's server so that the trades can be executed in nanoseconds. However, margins have become progressively thinner making this type of program trading less profitable

Edit Glossary Term