Finance: high-speed trading
04/03/2025
3 min
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The old saying that ‘time is money’ has never been truer than in the world of High-Frequency Trading (HFT), where transactions are concluded in micro or nanoseconds. Paolo MAZZA, professor of finance at IÉSEG and Head of the Asset and Risk Management major (PGE Masters), takes a closer look at a practice that is as widespread as it is controversial.
What is high frequency trading?
HFT is a bit of a catch-all term, but by definition its principle is based on speed. It’s not a long-term investment: you don’t bet on the growth of companies, you don’t capitalise on a sector, you aim for a monetary gain on quick buy and sell positions.
Technically, how does it work?
As finance is undoubtedly the most fertile ground for implementing new technologies, stock market players did not wait for AI to automate the match between supply and demand: computerised order execution has been practised since the 1970s.
However, the spread of highspeed broadband has made it possible to access much faster execution speeds throughout the world. But the key to gaining a decisive advantage is to be as close as possible to the heart of the exchange’s central server. Trading firms are investing a lot of money to be as close as possible to the exchanges. Being able to rely on a few metres of fibre optic cable rather than several kilometres makes all the difference. As for AI, it doesn’t really change the game in terms of physical architecture or network operation, but it does speed up information processing.
Read the full article in the latest edition of Change Magazine (“Time is indefinable”):
This magazine aims to be an information tool, thanks to the range of expertise of our professors and the informed opinions of our professional partners in relation to current themes. This tool aims to deliver ideas and reflections to its readers, in order to cultivate their daily lives and their perception of the challenges facing the companies of today and tomorrow.
Paolo Mazza is a Professor of Finance at IÉSEG School of Management where he teaches global finance, data analytics and visualization, as well as trading & exchanges courses. Before holding this position, he was an ARC Postdoctoral fellow at the Louvain School of Management (Université catholique de Louvain).
