Experimented to verify the hypothesis that Algorithmic Trading affects liquidity positively. That is when Algorithmic Trading Frequency rises Liquidity rises and when Algorithmic Trading Frequency falls so does Liquidity.

- Extracted records regarding the trades of 20 stocks for the three year duration of the data available.
- Used MATLAB to measure the algorithmic trading frequency of these stocks on randomly chosen days for 5 minute blocks. Plotted the results on a line graph.
- Used MATLAB to measure the bid ask spread of these stocks on the same days. Plotted the results on a line graph. The bid ask spread is an indicator of liquidity.
- It was observed that there is a correlation between algorithmic trading falls so does liquidity and this seems to indicate that there is a possibility that algorithmic trading may cause it. However causation does not equal correlation and so the Granger Causality Test was used on R to verify causality. Preliminary tests indicate causality does exist. However further verification is required.