A session at the CBS Competitiveness Day 2015 - In recent years financial markets have undergone a huge transformation driven by technology and regulation. Both the structure of the markets in which participants operate and the behavior of those participants have seen a phase shift towards increasing fragmentation and digitalization where trades take place in micro- or even nanoseconds. We will present a study of high-frequency trading and show how the use of high-speed algorithms might transform the financial markets.

1. High-Frequency Trading:
Strategies and Implications
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Competitiveness Day 2015
Ann-Christina Lange, ph.d., assistant professor
Institut for ledelse, politik og filosofi, Copenhagen Business School, Denmark
http://info.cbs.dk/crowds, (ala.mpp@cbs.dk)

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Methods and Data
• A sociological approach to HFT allows us to follow the daily practices and
conversations among high-frequency traders (HFTs).
• How professional HFTs (traders and programmers) themselves describe their jobs is highly
informative about the reasoning behind their trading strategies – e.g. if they draw implicitly or
explicitly on assumptions from crowd psychology.
• Ethnographic observations: HFTs were observed while working at their desk.
• 6 weeks inside a small HFT prop shop close to Wall Street.
• One-day visits to 4 other HFT trading firms in New York and New Jersey.
• Designing and building black box market automata, supervising and monitoring algorithms.
• The establishment of back-office facilities necessary for HFT activity.

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Order types and HFT strategies

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Order book depth

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Conclusion
The questions a sociological analysis gives rise to:
1.How can we hold an algorithm accountable (when the
rational and intentional subject is disappearing)?
2.And how can we measure the effect of the interaction
between algorithms on the financial markets?

8. Thank You!
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