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Most trading on modern exchanges, worldwide, is done by computerised clerks working at the behest of human traders. Like every new technology, this has induced gainers and losers. The statistical analysis of data has generally shown that algorithmic trading has benefited market quality. Algorithmic trading calls for careful thinking by regulators in terms of the impact on their functions such as enforcement against market abuse.
Algorithmic and high-frequency trading has brought about large changes in financial markets (“Who is afraid of algorithmic trading” by Ajay Shah, Business Standard, August 22, 2016). Rigorous analysis is required to identify areas of potential market failure, as well as possible corrective interventions. At the IGIDR Finance Research Group, we used trades and orders data