HFT Firms Aren’t ‘Fair Weather Liquidity Suppliers’: Study

A major part of the high frequency trading (HFT) debate is whether the liquidity that HFT firms provide will evaporate when there is a crisis. Market makers have never been willing to ride a crashing market all the way to the ground, but if HFT firms are less willing than traditional brokers it would mean that the market is less sturdy than it used to be. Toulouse School of Economics researchers Bruno Biais, Fany Declerck, and Sophie Moinas argue that in fact HFT proprietary traders remain active during a crisis because they are able to keep adverse costs under control….