Erschienen in:ECB Working Paper ; No. 2290 (2019) ISBN 978-92-899-3552-4
Umfang:
1 Online-Ressource (56 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3402867
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 11, 2019 erstellt
Beschreibung:
We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size reform - which we use to disentangle the effects of the rising share of high-frequency trading in the market from the effects of high-frequency competition. We find that when HFTs compete, their speculative trading increases. As a result, market liquidity deteriorates and short-term volatility rises. Our findings hold for a variety of market quality and high-frequency trading behavior measures