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Bundesbank Says High-Frequency Trading Can Enhance Volatility

  • Findings support debate over tighter regulation, report shows
  • HFT makes up about 50% of trading in liquid U.S., E.U. markets

High-frequency trading has the potential to both increase market liquidity and remove it at times of higher volatility, a study by the Bundesbank has found.

The report, published Monday, studied granular data from Bund and DAX futures markets, the two most liquid German investment instruments in which HFT makes up a significant portion of trading activity.