ECB published a study on the impact of HFT today (NASDAQ, NYSE) to financial markets. The main conclusion, in fact - HFT killed scalping.
You can download it here:
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1602.pdf
The main findings are as follows:
- HFT makes markets more efficient, reducing pricing errors.
- If the regulators will wet the HFT, then the market efficiency will decrease, volatility will grow
- During times of strong market shifts, HFT can increase market volatility.
In the overview, all price changes are divided into two types:
- permanent price changes
- pricing errors (noise)
So HFT improves efficiency, when trading against noise. The noise level is reduced, the price becomes more efficient.
But when HFTs start to play in the direction of large orders, they play in a permanent shift direction, and enhance the movement.
Original : smart-lab.ru/blog/149237.php