In High-Frequency Trading (HFT), How Quickly Do Algorithms Adjust the Bid-Offer Spread in Response to Volatility Spikes?

HFT algorithms adjust spreads in milliseconds or even microseconds, essentially instantaneously. During a volatility spike, the algorithms rapidly widen the spread to increase the profit per trade, compensating for the higher inventory risk.

In extreme cases, they may even cancel all outstanding orders and temporarily withdraw liquidity, which can exacerbate the volatility.