Skip to main content

High-Frequency Trading: An Efficient Trading Platform or a High-Speed Threat?


In the age of Artificial intelligence, large investment institutions, hedge funds, and investors also use powerful computer algorithms to automate the transactions of many orders at extremely high speeds. Traders who employ this automated trading platform, called high frequency trading, can execute orders in the stock market in milliseconds or thousandths of a second—the average time it takes the human finger to click the mouse is allegedly 150,000 microseconds.

However, very little is known about how this automated form of trading affects capital markets and companies. While some researchers believe that high-frequency trading activities make the market more efficient, others warn us against their dangers. High-frequency trading is believed to increase investors’ losses and trigger major financial crashes. But that’s not all. When financial transactions are executed multiple times in fractions of a second, transparency and ethics can be at stake. Researchers and practitioners have long suspected that high-frequency traders may be acting opportunistically.

Since high-frequency traders buy and resell shares multiple times a day, they can artificially increase stock prices and profit largely when reselling shares. Their game however doesn’t benefit other players: by the time firms repurchase their own shares in the market, prices could be higher. As a result, these firms will be distributing less cash to their shareholders.

To better understand the impact high-frequency trading, Associate Professor Ali Akyol has been awarded a Telfer School of Management Research grant (SMRG). More specifically, he will examine if high-frequency traders artificially increase stock prices, and if firms who repurchase shares may be paying a high price at the end.

Who will benefit from this research?

Professor Akyol

“When a firm is buying back its shares in the market, an increase in the price means the firm needs to pay more for its shares. If high-frequency traders are found to be costing companies and their shareholders money, insights from this proposed study may contribute to the debate about regulations of high-frequency trading. Firms are required to follow strict rules when repurchasing shares, and from this perspective, this study will show if and how archaic rules and regulations affect these firms.”

Ali Akyol

Learn more about Professor Akyol’s research.

About the Author

Lidiane Cunha a été agente de la mobilisation des connaissances en matière de recherche à l'École de gestion Telfer de 2017 à 2022. Elle a notamment traduit des projets de recherche et des résultats complexes en un langage accessible, et a élaboré des histoires d'impact, des vidéos et des infographies. De plus, elle a fourni des conseils en matière de communication pour aider les administrateurs principaux, les membres du corps professoral et de la population étudiante aux études supérieures à rehausser le profil de la recherche à Telfer. Elle a élaboré une stratégie de communication pour le bureau de la recherche de Telfer, en plus de faire participer les diplômé.e.s et les partenaires communautaires à des initiatives visant à faire connaître la recherche de Telfer.<br><br>Lidiane Cunha was a Research Knowledge Mobilization Officer at Telfer from 2017 to 2022. She translated complex research projects and findings into plain language and developed impact stories, videos, and infographics. She also provided communications advice to help senior administrators, professors, and graduate students raise the research profile of the Telfer School of Management; developed a communications strategy for Telfer’s Research office; and engaged alumni and community partners in initiatives to raise awareness about Telfer’s research.