Very Fast Money: High-Frequency Trading on the NASDAQ

The impact of latency sensitive trading on high frequency arbitrage opportunities

“…Examining the NYSE and NASDAQ markets, Hendershott et al (2011a,b) and Hasbrouck and Saar (2013) report that bid-ask spreads and volatility improved during times of increased HFT, while Jarnecic and Snape (2014) document that on the London Stock Exchange (LSE) HFT is associated with shorter order duration and thinner depths that increase the transience of prices. Carrion (2013) and Brogaard et al (2014a) extend these studies by investigating the relation between HFT and information efficiency/price discovery and document that HFT is associated with improved impounding of information into markets. However, Jain and McInish (2012) find that HFT increases tailrisk in Japan, while Boehmer et al (2014) in their global study report that HFT increases short-term volatility, leading to further negative externalities in the market, as modelled by Biais et al (2012).…”

The Economics of High-Frequency Trading: Taking Stock

“…Empirical studies on data samples with HFT identification generally echo the findings of AT studies. In particular, HFTs are more likely to add limit orders to the book when the spread is wide, and thus supply liquidity (Carrion 2013;Hagströmer, Nordén & Zhang 2014;Jarnecic & Snape 2014). Similarly, Yao & Ye (2015) find that HFT liquidity supply is larger for stocks for which the spread is constrained to be large because of tick size.…”

Efficient Performance Evaluation for High-Frequency Traders

“…The concept of trading time is not new to the financial economics literature. For instance, seminal papers by Clark (1973) and more recently Carr and Wu (2004) provide evidence that clock time and trading times differ and matter for asset pricing and risk management. Clark found that finite variance distributions subordinate to the normal distribution fit cotton futures prices data better than the normal distribution.…”