High frequency trading contributes to – but is not responsible for – changes in trading. But there is still considerable concern that market abuse has increased and supervision is insufficient. These are the main conclusions from Finansinspektionen’s investigation.
FI’s investigation has demonstrated that the impact of high frequency trading on trading is smaller than feared. Swedish investors believe that trading has undergone a transformation and that the market has become more volatile, but that these changes can be explained by multiple factors and not only the emergence of high frequency trading.
International research indicates that the risk for financial stability is limited even if the growing technological advancements in trading can create uncertainty on the market. However, there is also considerable concern among Swedish investors that market abuse has become more widespread and difficult to identify.
FI’s investigation was conducted during the winter of 2011. It includes both the industry’s view on high frequency and algorithmic trading and the current research published in the area.