Since high-frequency trading rose a debate began a debate has raged over whether super fast traders has a positive influence or hinders markets. One side argues that they are a plus for markets because a huge number of transactions dealt with high frequency trading has lower costs due to narrow spreads. Critics oppose this as slower market participants should charge higher spreads to protect themselves from sudden market movements.
to find out which side is right the following experiment was held. Starting form 2010 high frequency traders began using ultra fast microwave links to relay prices and other information between Chicago and New York. To begin with, only some traders had access to microwave networks. This transmissions are starting to malfunction during bad whether. Therefore, people conducting the experiment used meteorological data along the path of their connections to determine when storms occur and determine how this affects the spread of various securities.
After the experiment data showed that in bad conditions the fastest high-frequency traders slow down but this effect is positive for market liquidity.
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