I review the recent high-frequency trader (HFT) literature to single out the economic channels by which HFTs affect market quality. I first group the various theoretical studies according to common denominators and discuss the economic costs and benefits they identify. For each group, I then review the empirical literature that speaks to either the models’ assumptions or their predictions. This enables me to come to a data-weighted judgement on the economic value of HFTs.
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Albert J. Menkveld (2016) studied this question.
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