‘Making’, ‘taking’ and the material political economy of algorithmic trading

Abstract

Drawing upon interviews with 72 practitioners of automated, ultrafast high-frequency trading (HFT), this paper identifies the most salient divide within HFT: between algorithms, trading groups and firms that specialize in ‘making’ (in adding bids to buy and offers to sell to exchanges’ electronic order books) and those that specialize in ‘taking’ (in executing against existing bids and offers in those order books). The paper explores how ‘making’ and ‘taking’ algorithms interact, emphasizing the materiality of that interaction (including, e.g. the surprising effect on it of rain), and suggesting the importance of the ‘material political economy’ of algorithmic trading: the shaping of that trading, in economically consequential ways, by material orderings that could be different.