Algorithmic Trading’s Dual Impact on Derivatives Markets
Algorithmic trading, particularly high-frequency strategies, now dominates derivatives markets—executing the majority of daily volume in futures, options, and swaps. These systems operate at speeds beyond human capability, creating efficiency but also systemic risks.
The technology's advantages are clear: execution speed, emotionless consistency, and liquidity provision stabilize markets. Yet the same mechanisms can amplify catastrophic failures—technical glitches and overfitting risks lurk beneath the surface.