Computer-Driven High Speed Trading Improves Market Liquidity
University of California, Berkeley Haas School of BusinessResponding to concerns about an increasingly electronic stock exchange, Terrence Hendershott studied algorithmic trading and found that computer-driven trading based on algorithmic formulas does, in fact, improve the market’s liquidity. Furthermore, this kind of high speed trading allows stock prices to become more “efficient” or reflective of true supply and demand in the market.