Computerized and High‐Frequency Trading

Abstract The use of computers to execute trades, often with very low latency, has increased over time, resulting in a variety of computer algorithms executing electronically targeted trading strategies at high speed. We describe the evolution of increasingly fast automated trading over the past decade and some key features of its associated practices, strategies, and apparent profitability. We also survey and contrast several studies on the impacts of such high‐speed trading on the performance of securities markets. Finally, we examine some of the regulatory questions surrounding the need, if any, for safeguards over the fairness and risks of high‐speed, computerized trading.