High Frequency Trading Definition MiFID II

High Frequency Trading (HFT) is a form of algorithmic trading characterized by the use of advanced computer algorithms to execute a large number of orders at extremely high speeds. The primary aim of HFT is to capitalize on minute price discrepancies and to provide liquidity to markets. This trading style relies on high-speed data networks, powerful servers, and complex algorithms to make decisions and execute trades within fractions of a second. With the advent of regulations such as the Markets in Financial Instruments Directive II (MiFID II), the landscape of HFT has undergone significant scrutiny. MiFID II, which came into effect in January 2018, introduced stricter rules for trading practices, focusing on improving market transparency, reducing systemic risk, and protecting investors. Under MiFID II, HFT firms are required to be more transparent about their trading strategies and the infrastructure they use, and they must adhere to new standards for market data reporting and algorithmic trading. This regulatory framework aims to curb market abuses and ensure that HFT activities do not adversely impact market stability.