High-Frequency Trading

High-Frequency Trading (HFT) is a form of algorithmic trading characterised by extremely high order execution speeds (measured in microseconds), very high order volumes, very short holding periods (often seconds or less), and the use of co-location infrastructure — where trading servers are physically located inside or adjacent to exchange data centres to minimise latency. HFT strategies include market making (continuously quoting bid and ask to earn the spread), latency arbitrage (exploiting tiny price discrepancies across venues faster than others can react), and statistical arbitrage. In India, SEBI has implemented specific regulations around co-location facilities, order-to-trade ratios, and algorithm approval requirements to manage the impact of HFT on market fairness and stability.