Algorithmic trading has revolutionized the stock market by enhancing trading efficiency, increasing liquidity, and reducing transaction costs. However, it has also raised concerns about increased market volatility and systemic risks. This paper explores the impact of algorithmic trading on stock market volatility and liquidity, analyzing both its benefits and challenges. We examine how high-frequency trading (HFT) influences market stability and discuss regulatory measures to mitigate risks. A case study on the 2010 Flash Crash provides insights into the unintended consequences of algorithmic trading.
Algorithmic Trading, Stock Market, High-Frequency Trading, Market Liquidity, Volatility, Flash Crash.