Innovations in the means of data transmission, have sparked a race to minimize latency in the financial markets, where automated traders and high-frequency traders use every possible option to gain a competitive advantage over their competition.

Erratic market behaviour such as flash crashes and stories of rags and riches have triggered academic and public interest in the inner workings of these new kinds of traders and the possible effect their presence has on the market.

Simulating a limit-order book, this work uses an agent-based model to look at the effects high-frequency trading and low-latency market making has on the stock market in terms of the stability of asset prices, liquidity of the limit-order book and wealth effects between the involved trader types.


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