Introduction:
It is obvious that during the last two decades the financial market has changed. The main cause of development is the result of human knowledge of information technology (IT). The story behind the new structured market can be defined as new ideas and opportunities to make more money being help by computers. Indeed, a clear advantage of computer-aid trading is having access to higher speed. Nowadays, in market place, not only minutes have lost their values but also seconds are becoming worthless. The time aspect of today’s highly electronic age is measured in milli, micro, or even nano-seconds. High Frequency Trading, commonly known as HFT is one of the popular ways of trading using computers. Indeed, HFT is computer determined trading; the algorithm, beforehand programmed by human, makes important decisions such as timing, price, or in many cases, executing the entire order without human interaction . In this survey, we will focus on HFT, its history, its advantages together with its drawbacks and its future. Our main concern will be to try to answer the following question:
Is this market takeover by computers the future of trading or the first steps to a collapse of market?
History of HFT:
The history of HFT began in 1989, when Steve Swanson, a young programmer, and Jim Hawkes, Swanson’s college statistics teacher, decided to program algorithms from predictive formulas for the stock market in order to predict stock prices, to automatically trade and to finally make money. This would later become the world’s first HFT firm, Automated Trading Desk (ATD). At this period, the only way of trading was still manually posted offers of trade on handwritten tickets. It was then an easy prey for ATD trades execution within ...
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...putting a very small tax on these transactions can be useful for government to make some money and reuse it for good purposes.
Conclusion:
Regarding the different facts related to HFT, there will always be a strong debate about the legitimacy of use of HFT. In our opinion and to answer the question asked in the introduction, HFT is not in itself harmful, but it has to be used wisely and with supervision. In this view, we think that the human must have the final word on the operation done by the machine. A strong control should be put in place in order to avoid further problems, as well as a limitation on some markets. We also think that the establishment of a tax on HFT transactions is a very good idea, in order to be able to earn some money on these numerous transactions.
In the end, only future will tell us if HFT is a sustainable way to make transactions.
Shmoop Editorial Team. "The Market Revolution Summary & Analysis." Shmoop University, Inc. Shmoop.com, 11 Nov. 2008. Web. 4 Nov. 2011. .
The goal is to teach you to wear the glasses of a professional trader who sees the difference between low and high-probability trades. With these new glasses, your trading account gradually reflects the consequences of making high-probability trades. With more money in your trading account, you can buy more contracts. You experience the law of compounding, and your account grows exponentially.
The report of Robert Reich: “Why the Rich are getting Richer and the Poor, Poorer,” is an eye opener and a warning for society regarding unemployment that it will be facing and is currently facing due to a lack of technology and education. It clearly articulates that the jobs of routine producers and in-person servers have vanished totally as modern techniques have replaced them. The author has stated that the only people whose jobs are on the rise are symbol analysts. As stated in the report, symbol analysts are the real problem solvers. Their skills are highly in demand worldwide because they are the ones who first analyze the problem and then solve it.
On the other hand, there is the element of widespread profit from the market of the electronic currency. The ones who [participate...
But as we know that each and every coins have two sides: so similar to that Cyber Physical systems have also pros and cons with different grand challenges. The minus points of these systems are unpredictability and unemployment, computers gain self-awareness, etc.
Chapter 11 closes our discussion with several insights into the efficient market theory. There have been many attempts to discredit the random walk theory, but none of the theories hold against empirical evidence. Any pattern that is noticed by investors will disappear as investors try to exploit it and the valuation methods of growth rate are far too difficult to predict. As we said before the random walk concludes that no patterns exist in the market, pricing is accurate and all information available is already incorporated into the stock price. Therefore the market is efficient. Even if errors do occur in short-run pricing, they will correct themselves in the long run. The random walk suggest that short-term prices cannot be predicted and to buy stocks for the long run. Malkiel concludes the best way to consistently be profitable is to buy and hold a broad based market index fund. As the market rises so will the investors returns since historically the market continues to rise as a whole.
Most of us are so used to using technology and automated processes that we, as a society, have become almost reliant and dependent on it. The article begins by explaining how automated systems have made such an impact on the financial market and in financial services; everything from trade execution to risk management is now automated. Even with trading volume alone, 75% of it is handled by a type of automation (Davis, Kumiega, and Van Vilet). The authors explain how putting so much confidence in automation technology can be very risky and introduce a number of ethical issues. A good example of this was seen in 2012 when the Knight Capital Group used their new trading software which caused them to lose $440 million in less than a half hour and also crashed the New York Stock Exchange (Davis, Kumiega, and Van Vilet). At first glance, it may seem like the only harm done was to the company itself and the inconvenience of closing down the stock mar...
The efficient market hypothesis has been one of the main topics of academic finance research. The efficient market hypotheses also know as the joint hypothesis problem, asserts that financial markets lack solid hard information in making decisions. Efficient market hypothesis claims it is impossible to beat the market because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information . According to efficient market hypothesis stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments . In reality once cannot always achieve returns in excess of average market return on a risk-adjusted basis. They have been numerous arguments against the efficient market hypothesis. Some researches point out the fact financial theories are subjective, in other words they are ideas that try to explain how markets work and behave.
“I've known people who had fantastic ideas, but who couldn't get the idea off the ground because they approached everything weakly. They thought that their ideas would somehow take off by themselves, or that just coming up with an idea was enough. Let me tell you something -- it's not enough. It will never be enough. You have to put the idea into action. If you don't have the motivation and the enthusiasm, your great idea will simply sit on top of your desk or inside your head and go nowhere”-Donald Trump. The stock market is just a place where people invest in others ideas for profit. If all stock brokers take a legal oath or some type of legal agreement then there will be fewer frauds will take place. Many stock brokers are trusted with huge amounts of money given by their clients willingly. Their clients give them this money in order for the stock broker to make more of it. Many clients give their money away without any form of documents, just word of mouth. Stock brokers should not be able to manage another’s person money without legal oath, legal document and a professional advisor present. With these check points in place the probability of unsuitability fraud, improper investment advice, hidden cost, over concentration and churning would be much less than it is right now.
As global markets today's financial market increase in complexity, the tradition of learning by doing will not suffice. The financial manager today must hit the ground running with ready expertise to be used effectively as the CFO or as part of a team of financial experts within the ranks of the CFO's office. In navigating the international marketplace effectively, financial managers find themselves in a technology driven, real time information deluge which helps them to satiate the knowledge demands of investors, commercial and investment bankers, shareholders, employees, brokers, traders et al who must know particular companies, their products and the markets wherein they operate.
So, we can interpret that bitcoin will help to make future transactions smooth, efficient & more productive.
...ng an acceptable form of transaction.Governments need to be more transparent to the public.A lot of ‘under table’ transaction take place in the most basic everyday services(passport,license, tax).Such services has the capability to go online reducing the red tape as money is only used via online transaction.
I am currently majoring in Finance Management. Most of the time people think of finance as just managing money. However, finance is needed for so much more! The finance industry deals with starting businesses, developing new products, expanding markets, as well as everyday things like saving for retirement, purchasing a home, and even insurance. The stock market, asset allocation, portfolio analysis, and electronic commerce are all key aspects in finance. In this paper, I will explain how these features play a vital role in the industry, along with the issues that come with these factors.
This paper will define and discuss five financial theories and how they impact business decisions made by financial managers. The theories will be the Modern Portfolio Theory, Tobin Separation Theorem, Equilibrium Theory, Arbitrage Pricing Theory (APT), and the Efficient Markets Hypothesis.
In the modern world, financial markets play a significant role, with huge volumes of everyday dealings. They form part of contemporary economic lifestyle and determine the level of success of many people. Humans have always been uncertain of what the future holds and thus, tried to forecast it. The forecast of course cannot omit the likelihood of “easy money” by forecasting the prices of equity markets in the future.