Dolgopolov on High-Frequency Trading

Stanislav Dolgopolov has posted Regulating Merchants of Liquidity: Market Making from Crowded Floors to High-Frequency Trading on SSRN with the following abstract:

This Article develops a framework for analyzing the very existence of regulation of market makers and singles out such key factors as externalities in the market for liquidity, vulnerability of these market participants to certain trading strategies, and their own opportunism. This framework is explored through the evolution of the market making segment of the securities industry from crowded floors to high-frequency trading, and the regulatory outlook is analyzed from the standpoint of the current market structure crisis.