Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 14, 2017 erstellt
Beschreibung:
We propose a model of market making where a strategic high frequency trader exploits his speed and informational advantages to place quotes that interact with the orders of low frequency traders. We characterize the optimal market making policy of the high frequency trader analytically. Our model shows that higher speed translates into higher profits through a more aggressive quoting policy. The optimal policy is consistent with empirically documented features of high frequency trading such as order cancellations and predatory trading