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The study found there is "no evidence to suggest that realised return volatility in electronically-traded futures markets has changed through time". High-frequency traders are often blamed for increasing volatility because they use computer algorithms to dart in and out of markets faster than the blink of an eye. "We now have empirical evidence that volatility in the futures markets has neither increased nor decreased once the effects of macro-economic shocks are removed", said Walt Lukken, president and chief executive officer of the futures association.
High-frequency trading accounted for more than 60 percent of all futures volume in 2012 on US exchanges, according to New York industry researcher The Tabb Group. Risks associated with the practice first drew wide attention after the stock market's "flash crash" of 2010, when the Dow Jones Industrial Average dropped about 700 points within minutes. The fall was exacerbated by high-frequency traders unloading their inventory of securities at the depth of the plunge.
The study used two benchmarks to assess intraday volatility in the 15 futures contracts, which included seven interest rate contracts, five equity index contracts, two crude oil contracts and one sugar contract. The study does not draw a definitive connection between the rise of high-frequency trading, known as HFT, and steady volatility in the contracts, said Charles Jones, a finance professor at Columbia University's business school.