Theories for Analysing Innovation and Technology in Emerging Financial Markets: The Case of Algorithmic and High Frequency Trading

Theoretical and empirical analysis of complex innovation and technology from a multi-disciplinary perspective is often recommended, yet rarely undertaken in management and information systems scholarship. This paper examines high frequency trading as an innovation in financial markets enabled by sophisticated computer technology. Primary data from the US and UK is combined with secondary sources from academic studies, government agencies, financial institutions and the media on the ideologies and practices governing high frequency trading. Theoretical perspectives of rational choice theory, bounded rationality, social constructionism and Marxism are rooted in different ontological and empirical positions. Each theory prioritises distinct levels and units of analysis for HFT which, by extension, shape the research agendas for examining the regulatory processes, market structures, firm strategies and technologies of the HFT phenomenon.