Staff Report on Algorithmic Trading in U.S. Capital Markets

As required by § 502 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, this staff report describes the benefits and risks of algorithmic trading in the U.S. equity and debt markets.
Broadly speaking, and as more fully discussed below, algorithmic trading in the equities—and to a lesser extent—in the debt market, has improved many measures of market quality and liquidity provision during normal market conditions, though studies have also shown that some types of algorithmic trading may exacerbate periods of unusual market stress or volatility. Advances in technology and communications have enabled many market participants to more efficiently provide liquidity, more efficiently access market liquidity, implement new trading services, and more effectively manage risk across a range of markets.