Repository logo
  • English
  • Deutsch
Log In
or
  1. Home
  2. HSG CRIS
  3. HSG Publications
  4. Regulating High Frequency Trading : A Micro-Level Analysis of Spatial Behavior, Optimal Choices, and Pareto-Efficiency in High Speed Markets
 
  • Details

Regulating High Frequency Trading : A Micro-Level Analysis of Spatial Behavior, Optimal Choices, and Pareto-Efficiency in High Speed Markets

Series
St. Gallen Law School, Law & Economics Research Paper Series
Type
working paper
Date Issued
2012
Author(s)
von Müller, Camillo  
Abstract
The present paper considers the issue of High Frequency Trading (HFT) regulation. Rather than discussing macro-level effects of HFT that are still under debate (Sornette & Von der Becke, 2011) its analysis focuses on the issue of regulation from the perspective of HFT firms. Assuming that HFT generates benefits to firms by allowing them to trade at lower latencies than their competitors, binary choices of HFT investments yield Pareto-inefficient allocations if physical limits to latency reduction are taken into account. Adjustments in the payoff structure of the assumed model show that regulation can minimize negative externalities if the legislator is able to differentiate between market participants and their HFT strategies. The results of the alternated model indicate that legislators should be concerned about negative externalities of certain types of HFT firm behavior rather than about HFT itself. The transparency proposals of MifID II hence promise to serve as a finer tuned instrument for regulating HFT than a general financial transaction tax.
Language
English
Keywords
financial transaction tax
high frequency trading
MiFID II
prisoner's dilemma
Tobin tax
regulation
von Thünen
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
No
Publisher
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2000119
Publisher place
St Gallen
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/93024
Subject(s)

economics

Division(s)

IfB - Institute of Ma...

Eprints ID
209514
File(s)
Loading...
Thumbnail Image
Name

20120208HFT_FinalWorkingPaper.pdf

Size

482.95 KB

Format

Adobe PDF

Checksum (MD5)

78efebf2a36ce8ce6638a1be36d2fa49

here you can find instructions and news.

Built with DSpace-CRIS software - Extension maintained and optimized by 4Science

  • Privacy policy
  • End User Agreement
  • Send Feedback