Presentation on High Frequency Trading risks delivered during OpRisk conference in London in June 2012. Content includes an overview of key risks affecting high frequency trading.
1. Failure to meet regulatory and exchange requirements.
2. Removal of human decision making once the algorithms are finished.
3. Extreme market behaviour: Flash Crash (2010).
4. Theft or loss of Intellectual Property.
5. Errors or problems suffered by clients using Direct Market Access and Algo/HFT.
6. Business impact of latency (system errors may increase delays).
7. Limited security controls at the infrastructure level.
8. Failure of hedges. 9. Incorrect/untested strategies.
IT Audit Director