Fair and orderly trading? An analysis of the European regulation of High Frequency Trading
High frequency trading is a form of automated electronic trading that takes place on stock exchanges and other marketplaces for financial instruments. High frequency traders use advanced algorithms and employ trading strategies which are characterized by extremely high speed and large volumes of orders and transactions. High frequency trading has emerged during the last two decades as a result of technological and institutional changes in the financial markets. Regulatory changes have played a major role in this development.
This PhD project focuses on the regulation of high frequency trading, with particular emphasis on the new provisions laid down at European level in MiFID II which will enter into force in 2018.
About the Project
The thesis examines various techniques used in high frequency trading and the effects these trading technique may have on market quality, but also on matters of societal importance, inter alia, systemic risk. Although there are different viewpoints in literature about the pros and cons of high frequency trading, the examination leads to a conclusion that high frequency trading poses certain risks to well-functioning financial markets. Next, the thesis analyses the European regulation of high frequency trading with the purpose to assess whether the regulation can be expected to alleviate the potential problems and risks that the preceding analysis has revealed. The discussion also includes selected other provisions than those directly aimed at high frequency trading, in order to determine whether they may involve restrictions on such activity. Finally, the thesis discusses the legal approach which has been chosen in the directive. Could the aims and objectives of the directive be obtained more effectively by using other regulatory means? This part draws on newer literature particularly emerging after the financial crises and which brings important new insights regarding the theoretical foundations which the current regulatory approach rests on.
This PhD-project is part of the Research Project International Financial Market Regulation, Institutions and Efficiency.
The thesis will be submitted in the autumn 2017.
The Financial Market Fund and University of Oslo