Exercise
Choose the correct option.
1. High-frequency traders generally prefer which of the following?
I. Having computers located in close proximity to an exchange
II. “High latency”
III. Making a few trades in a short amount of time
IV. Short holding periods for securities purchased
A. I and II
B. II and III
C. I and IV
D. IIII and IV
2. Which of the following is not a characteristic of high-frequency trading?
A. Although most high-frequency trades are not profitable, the profits made by the few that are make high-frequency trading worthwhile.
B. High-frequency trading can exacerbate market anomalies.
C. High-frequency trading provides opportunities for market manipulation.
D. High-frequency trading usually involves many cancelled orders.
3. Which of the following does low latency not measure?
A. The time it takes for information to reach a trader’s system
B. The time it takes for the algorithms to respond to information
C. The time it takes for a person to initiate an order
D. The time it takes for the order to reach an exchange and be implemented
Answers
1. C. High-frequency traders are always seeking the best “low-latency