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Global Algorithmic Capital MarketsHigh Frequency Trading, Dark Pools, and Regulatory Challenges$
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Walter Mattli

Print publication date: 2018

Print ISBN-13: 9780198829461

Published to Oxford Scholarship Online: January 2019

DOI: 10.1093/oso/9780198829461.001.0001

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A Case Study in Regulatory Arbitrage and Information Asymmetry

A Case Study in Regulatory Arbitrage and Information Asymmetry

High Frequency Trading and the Post Only Intermarket Sweep Order

Chapter:
(p.28) 3 A Case Study in Regulatory Arbitrage and Information Asymmetry
Source:
Global Algorithmic Capital Markets
Author(s):

Haim Bodek

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198829461.003.0003

While much of the public debate surrounding high frequency trading (HFT) and algorithmic trading has centred on speed, less has been said about the circumvention of regulation via special order types—complex and often non-transparent ways for high frequency traders to interact with exchange markets and other trading venues, allowing them to achieve a favourable execution position at the expense of other market participants. This chapter documents the special order types used by high frequency traders, the absence of adequate disclosure by exchanges, and the problematic interaction between order types designed to accommodate HFT strategies and the order types typically employed by public investors and agency brokers.

Keywords:   high frequency trading, high frequency trader, HFT, market structure, stock exchange, order types, regulatory arbitrage, information asymmetry, post only order, Post Only ISO

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