Very fast money: High-frequency trading on the NASDAQ

Carrion, Allen

doi:10.1016/j.finmar.2013.06.005

Cited by 288 publications

(112 citation statements)

References 40 publications

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“…One observes similarly high volatility before and after the transition. The only event seems to be the onset of high frequency trading (HFT) in 2005, see, e.g., [8,10,11]. In the left panel of figure 9 we show (as a representative example) the response time and the traded volume at the Eurex exchange.…”

Section: Explanations For the Observed Transition A Interpretatiomentioning

confidence: 99%

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Transitions in the stock markets of the US, UK and Germany

Raddant

Wagner

2016

Quantitative Finance

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In an analysis of the US, the UK, and the German stock market we find a change in the behavior based on the stock's beta values. Before 2006 risky trades were concentrated on stocks in the IT and technology sector. Afterwards risky trading takes place for stocks from the financial sector. We show that an agent-based model can reproduce these changes. We further show that the initial impulse for the transition might stem from the increase of high frequency trading at that time.

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Section: Explanations For the Observed Transition A Interpretatiomentioning

confidence: 99%

“…Its pdf can be characterized by the shape parameter α using the Pareto-Feller parametrization from eq. (8). We obtain α by maximizing the Log-Likelihood L in each window.…”

Section: B High Frequency Trading and The Returns Distributionmentioning

confidence: 99%

Transitions in the stock markets of the US, UK and Germany

Raddant

Wagner

2016

Quantitative Finance

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“…This pattern also raises a question on the HF trader' role in providing liquidity. Clearly when liquidity is most needed, they appear to withdraw from the market altogether (e.g., Carrion (2013)). …”

Section: Ivd2 Short Selling Banmentioning

confidence: 99%

A Blessing or a Curse? The Impact of High Frequency Trading on Institutional Investors

Tong

2013

SSRN Journal

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Combining data on high frequency trading (HFT) activities of a randomly selected sample of 120 stocks and data on institutional trades, I find that HFT increases the trading costs of traditional institutional investors. One standard deviation increase in the intensity of HFT activities increases institutional execution shortfall costs by a third. Further analysis suggests that HFT represents as an ephemeral and extra-expensive source of liquidity provision when demand and supply among institutional investors are imbalanced, and that the impact on institutional trading costs is most pronounced when high frequency (HF) traders engage in directional strategies (e.g., front-running).I perform various analyses to rule out an alternative explanation that HF traders are attracted to stocks that have high trading costs. First, HFT is most active on liquid stocks. Second, the results are robust to the controls for stable stock liquidity characteristics and events that might jointly affect HFT and trading costs. Third, an analysis of the HFT behavior around the temporary short selling ban in September 2008 highlights the opportunistic nature of liquidity provision by HF traders. Finally, Granger causality tests show that intensive HFT activity significantly contributes to institutional trading costs, but not vice versa.

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“…Our findings complement HFT market-quality papers. Most papers show a relationship between HFT and improved market quality (Brogaard, Hendershott and Riordan 2014;Hasbrouck and Saar 2013;Hagstromer and Norden 2013;Carrion 2013), while others find a mixed or negative relationship (Brogaard, Hendershott and Riordan 2013;Gai, Yao and Ye 2012). We are interested in the competition among HFT firms, which helps to explain some of the HFT and market-quality findings.…”

Section: Introductionmentioning

confidence: 99%

High-Frequency Trading Competition

Brogaard

Garriott²,

Pomeranets³

2018

J. Financ. Quant. Anal.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. iii Terms of use: Documents in AbstractWe analyze trading dynamics as successive high-frequency trading (HFT) firms begin to trade stocks in an equity market. Entrants compete with incumbents for volume, and there is crowding out. Earlier entry is associated with larger effects. After Passive HFT entry, incumbent spreads tighten. After Aggressive HFT entry, incumbent order flow loses informedness. Revenue data suggest entry reduces the profitability of HFT activity. The results show that part of the value of HFT comes from its competitiveness. JEL classification: G20, G14, L1Bank classification: Financial markets; Market structure and pricing RésuméLes auteurs analysent la dynamique des échanges après que des entreprises qui font des transactions à haute fréquence eurent commencé successivement à négocier des titres sur le marché des actions. Les nouveaux venus rivalisent avec les acteurs déjà présents pour obtenir plus de volume, ce qui entraîne un effet d'éviction. Les effets exercés par les premiers entrants sont plus prononcés. L'entrée de participants passifs donne lieu à un resserrement de la fourchette de cotation pour les participants existants. Après l'arrivée de participants agressifs, le contenu informationnel du flux d'ordres des participants existants diminue. En outre, les données tendent à indiquer une baisse de rentabilité des transactions à haute fréquence. Les résultats de l'étude montrent que l'intérêt de la négociation à haute fréquence réside en partie dans la compétitivité de cette activité.Classification JEL : G20, G14, L1 Classification de la Banque : Marchés financiers; Structure de marché et fixation des prix 2

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Very fast money: High-frequency trading on the NASDAQ

Cited by 288 publications

References 40 publications

Transitions in the stock markets of the US, UK and Germany

Transitions in the stock markets of the US, UK and Germany

A Blessing or a Curse? The Impact of High Frequency Trading on Institutional Investors

High-Frequency Trading Competition

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