Article High-Frequency Trading: A Primer

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The term “stock exchange” tends to conjure up images of a room crowded with men in suits – one hand pressing phone firmly to ear, the other waving furiously in the air. Once upon a time those iconic images were an accurate representation of the controlled chaos that was the floor of the venerable New York Stock Exchange, or NYSE as it is known.
When NASDAQ launched in 1971 as the world’s first electronic stock market, it set in motion the changes that would lead to the complex and fragmented status of markets today. A status better represented by the image of the “1s” and “0s” in a line of binary code. As alternative market centers proliferated – some exchanges, some not – so too did the choices of where to execute a trade. Today there are over 50 different venues at which a broker can seek to match his buy order with a seller.
Today there remains a common misconception that when you place an order with your broker to buy or sell a security, that order is sent to an exchange and...

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