Evolution of High-frequency Trading

Advances in computer technology have supercharged the transmission and execution of orders and
have compressed the holding periods required for investments. Once applied to quantitative
simulations of market behavior conditioned on large sets of historical data, a new investment
discipline, called “high-frequency trading,” was born. This chapter examines the historical evolution of
trading to explain how technological breakthroughs impacted financial markets and facilitated the
emergence of high-frequency trading.