2. HERE TO STAY? HIGH FREQUENCY TRADING

3. INTRODUCTION: WHAT IS ‘TRADING’? -Markets: NYSE, NASDAQ -Companies sell their equity/debt to investors on markets (“check markets”: http://finance.yahoo.com/)http://finance.yahoo.com/

4. WHAT IS HIGH FREQUENCY TRADING (HFT)? Types of HFT: Rebate TradingFilter TradingStatistical Arbitrage Characteristics/ Definition (Refer to example below) Monitor for stocks showing significant movement Seek pricing differentials between correlated markets and securities ExampleRapidly offer sell after posting bid to buy shares News stories trigger rapid algorithm buys Correlated stocks like Pepsi and Coca-Cola Marketing Making Momentum Trading Technical Trading Characteristics/ Definition Regulatory exemption to reduce spreads by creating market liquidity Similar to Filter TradingFind technical steps based on historically repeating patterns ExampleDesignated market makers (DMMS) obligated to maintain order in market by adding liquidity Filter Trading with Rebate Trading style Tracks stocks crossing 5-day moving average

5. RELEVANCE: WHY SHOULD YOU CARE? If HTF is beneficial for economic growth and financial success, we should support it If HTF is detrimental to economic growth and financial success, we should reject it

6. ADVANTAGES 1. Robustness-easily implemented on large scale: over 5 yrs, traders using HFT has doubled 2. Efficiency-speed and reduced overhead: “human hand... outclassed… by machines operating in milliseconds) 3. Profits-maximized: ($2.7 bil profits in 2007)

7. DISADVANTAGES TRIANGLE OF RISK 1. Investor 2. Company Risk 3. Market

8. DISADVANTAGES ILLEGAL ACTIVITY -High velocity of HTF enables elusive crime

9. CONCLUSION: HERE TO STAY

10. QUESTIONS?

11. REFERENCES "Findings Regarding The Market Events of May 6, 2010." SEC. SEC, 30 Sept. 2010. Web. 9 Oct. 2013.. Finger, Richard. "High Frequency Trading: Is It A Dark Force Against Ordinary Human Traders And Investors?" Forbes. Forbes Magazine, 30 Sept. 2013. Web. 9 Oct. 2013.. "How Dangerous Is Algorithmic Trading?" TechRadar. N.p., 8 Oct. 2011. Web. 9 Oct. 2013.. Philips, Matthew. "Knight Shows How to Lose $440 Million in 30 Minutes." Bloomberg. N.p., 2 Aug. 2012. Web. 11 Nov. 2013.. Philo, Eric S. "High-Frequency Trading Profits Crushed... but Danger Remains Unchecked." 247wallst.com. 24/7 Wall St, 24 Mar. 2013. Web. 12 Nov. 2013.. Rogow, Geoffrey. "Rise of the (Market) Machines." Wall Street Journal (WSJ). N.p., 19 June 2009. Web. 9 Oct. 2013.. Rowley, Brandon. "The World of High Frequency Trading." T3 Live, 2011. Web. 12 Nov. 2013..