High-frequency trading

High-frequency trading is a form of algorithmic trading defined by very high speeds, high order-to-trade ratios and extremely brief holding periods, sometimes seconds or fractions of a second, using co-located hardware and specialized software to react to market data faster than competing participants. Firms running these systems pursue small per-trade profits across enormous numbers of trades, at times millions in a single day, rather than building sustained capital positions, and as of 2016 the approach accounted for roughly ten to forty percent of equity trading volume and ten to fifteen percent of foreign exchange and commodities volume. Because it rarely carries positions overnight, its footprint shows up in trading statistics rather than balance sheets.