High frequency

High frequency (HF) is the ITU designation for the range of radio frequency electromagnetic waves (radio waves) between 3 and 30 MHz. It is also known as the decameter band or decameter wave as its wavelengths range from one to ten decameters (ten to one hundred metres). Frequencies immediately below HF are denoted medium frequency (MF), while the next band of higher frequencies is known as the very high frequency (VHF) band. The HF band is a major part of the shortwave band of frequencies, so communication at these frequencies is often called shortwave radio. Because radio waves in this band can be reflected back to Earth by the ionosphere layer in the atmosphere – a method known as "skip" or "skywave" propagation – these frequencies are suitable for long-distance communication across intercontinental distances. The band is used by international shortwave broadcasting stations (2.310 - 25.820 MHz), aviation communication, government time stations, weather stations, amateur radio and citizens band services, among other uses.

High-frequency trading

High-frequency trading (HFT) is a type of algorithmic trading characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools. While there is no single definition of HFT, among its key attributes are highly sophisticated algorithms, specialized order types, co-location, very short-term investment horizons, and high cancellation rates of orders. HFT can be viewed as a primary form of algorithmic trading in finance. Specifically, it is the use of sophisticated technological tools and computer algorithms to rapidly trade securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second. It is estimated that as of 2009, HFT accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012. High-frequency traders move in and out of short-term positions at high volumes and high speeds aiming to capture sometimes a fraction of a cent in profit on every trade. HFT firms do not consume significant amounts of capital, accumulate positions or hold their portfolios overnight. As a result, HFT has a potential Sharpe ratio (a measure of reward to risk) tens of times higher than traditional buy-and-hold strategies. High-frequency traders typically compete against other HFTs, rather than long-term investors. HFT firms make up the low margins with incredibly high volumes of trades, frequently numbering in the millions.

HFT

HFT can refer to

Flash crash

A flash crash is a very rapid, deep, and volatile fall in security prices occurring within an extremely short time period. A flash crash frequently stems from trades executed by black-box trading, combined with high-frequency trading, whose speed and interconnectedness can result in the loss and recovery of billions of dollars in a matter of minutes and seconds.

Notable flash crashes

This type of event occurred on 6 May 2010 when a $4.1 billion trade on the NYSE resulted in a loss to the Dow Jones Industrial Average of over 1000 points and then a rise to approximately previous value, all over about fifteen minutes. The mechanism causing the event has been heavily researched and is in dispute.

Two notable flash crashes have occurred as of August 2013:

In October 2013 a flash crash occurred on the Singapore Exchange which wiped out $6.9 billion in capitalization and saw some stocks lose up to 87 percent of their value. The crash resulted in new regulations being announced in August 2014. Minimum trading prices of 0.20 cents per share would be introduced, short positions would be required to be reported, and a 5 percent collateral levy implemented. The exchange said the measures were to curb excessive speculation and potential share price manipulation.

2010 Flash Crash

The May 6, 2010, Flash Crash also known as The Crash of 2:45, the 2010 Flash Crash or simply the Flash Crash, was a United States trillion-dollarstock market crash, which started at 2:32 and lasted for approximately 36 minutes. Stock indexes, such as the S&P 500, Dow Jones Industrial Average and Nasdaq Composite, collapsed and rebounded very rapidly. The Dow Jones Industrial Average had its biggest intraday point drop (from the opening) up to that point, plunging 998.5 points (about 9%), most within minutes, only to recover a large part of the loss. It was also the second-largest intraday point swing (difference between intraday high and intraday low) up to that point, at 1,010.14 points. The prices of stocks, stock index futures, options and exchange-traded fund (ETFs) were volatile, thus trading volume spiked. A CFTC 2014 report described it as one of the most turbulent periods in the history of financial markets.

According to a December 6, 2015 article in the Wall Street Journal, new regulations put in place following the 2010 Flash Crash — when "bids on dozens of ETFs (and other stocks) fell as low as a penny a share — proved to be inadequate to protect investors in the August 24, 2015 flash crash, "when the price of many ETFs appeared to come unhinged from their underlying value." — ETFs were put under greater scrutiny by regulators and investors. August 2015 flash crash. Analysts at Morningstar claim that,