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Notes
- 1.
The original paper, Friedman (1953), mentions this in the context of speculation in foreign exchange markets.
- 2.
The itayose method is also used to determine the opening and closing prices if trading resumes after a temporary halt for some reason.
- 3.
The word “zaraba” refers to the period between the opening and closing of a trading session (for example, the period from 9:00 a.m. to 11:30 a.m. in the case of the TSE’s morning session).
- 4.
A “bid” refers to the price specified for a buy order, while an “ask” refers to the price specified for a sell order.
- 5.
- 6.
This is a technique called front running. For details, please see Adachi (2018).
- 7.
Meyer, Bullock and Rennison (2018).
- 8.
Tett (2019) introduces the various efforts to improve communication speeds undertaken by HFT traders.
- 9.
- 10.
Please see Kirilenko, Kyle, Samadi and Tuzun (2017), Wigglesworth (2019), etc.
- 11.
The legal term used is “High-Speed Trader.”.
- 12.
This skillful clearing of large orders while preventing market impact is called an “optimal execution strategy.” Implementing optimal execution strategies is one of the important applications of algorithmic trading.
- 13.
Adachi (2018) introduces these mathematical techniques in detail.
References
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Friedman M (1953) The case for flexible exchange rates, essays in positive economics, University of Chicago Press
Hosaka G (2014) An analysis of high-frequency trading on the Tokyo Stock Exchange (in Japanese). Securities Anal J 52:72–82
Kirilenko A, Kyle AS, Samadi M, Tuzun T (2017) The flash crash: high frequency trading in an electronic market. J Finance 72:967–998
Lewis M (2014) Flash Boys. Norton & Company, W.W
Meyer G, Bullock N, Rennison J (2018) How high-frequency trading hit a speed bump, Financial Times, January 1, 2018. https://www.ft.com/content/d81f96ea-d43c-11e7-a303-9060cb1e5f44
Tett G (2019) Finance v Physics: even ‘Flash Boys’ can’t go faster than light, Financial Times, February 21, 2019. https://www.ft.com/content/c529809a-349f-11e9-bd3a-8b2a211d90d5
Wigglesworth R (2019) Volatility: how ‘Algos’ changed the rhythm of the market, Financial Times, January 9, 2019. https://www.ft.com/content/fdc1c064-1142-11e9-a581-4ff78404524e
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Nakatsuma, T. (2021). The Mechanism of HFT and Its Merits and Demerits—The Information Efficiency Challenge. In: Kaji, S., Nakatsuma, T., Fukuhara, M. (eds) The Economics of Fintech. Springer, Singapore. https://doi.org/10.1007/978-981-33-4913-1_12
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