Table 5 Directions for Future Research
From: Will high-frequency trading practices transform the financial markets in the Asia Pacific Region?
Research Directions | Research Questions | Theories and Approaches | Potential Contributions |
|---|---|---|---|
HFT technology enhancement, innovation, diffusion and globalization | • What is the business value of advanced technology, such as real-time data services for traders? | Digital divide theory; technology adoption and diffusion theory; event history methods for adoption events; finite mixture logit modeling. | Based on technology and innovation adoption and diffusion models, we can analyse and forecast the evolutionary patterns of HFT in emerging markets, such as Asian financial markets in Asian, and give HFT practitioners useful guidance and help them avoid some problems. |
• What about HFT innovations? | |||
• What can Asian financial markets learn from U.S. and Europe? | |||
Market impact, transformation, and risk manage-ment for HFT operations | • What’s the impact of HFT on the underlying market quality? | Microeconometrics and empirical methods; natural experiments; and matched sample designs. | Researchers need to take a broader perspective than traditional bid-ask spread and liquidity measurement, to analyze the impact of HFT on financial markets. Researchers also should provide suggestions on the control of risks in the presence of HFT presence and promote market stability. |
• How are retail and institutional investors influenced by HFT use? | |||
• Why do significant incidents, such as the Flash Crash, happen in financial markets that employ HFT practices? | |||
• How to manage and mitigate risks, such as operational risk and traders’ misconduct, in financial markets with HFT present? | |||
Firm strategy, regulation, and future opportunities for HFT | • How will actions, decisions and strategies of market participants influence the evolution of HFT? | Theories of firm competition and strategy; financial IS ecosystem approach. | By studying financial markets with HFT practices, researchers can develop a deeper understanding of their impacts on different kinds of stakeholders. Also, the roles of regulators in promoting market-wide fairness and integrity need to more fully understood. |
• How do HFT regulations differ around the world? | |||
• What effects will they have on HFT evolution? | |||
• How can regulators ensure the fairness and integrity of financial markets with HFT present? |