In a new study, Andrei Kirilenko, the chief economist at the
Commodity Futures Trading Commission, along with researchers at Princeton
University and the University of Washington, examined high-frequency trading in
a futures contract called the e-mini S&P 500, between August 2010 and
August 2012.
The researchers did something they’d never been able to do
before: Used actual trading data from individual firms, though none were
identified. What that data does is help
explain the frenzy in today’s markets: The most aggressive firms tend to earn
the biggest profits, hence the incentive to trade as quickly and as often as
possible. Furthermore, these traders
make their money at the expense of everyone else, including less-aggressive
high- frequency traders…..
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