Need for speed? : exchange latency and liquidity

Albert J. Menkveld; Marius A. Zoican

Speeding up the exchange does not necessarily improve liquidity. The price quotes of high-frequency market makers are more likely to meet speculative high-frequency "bandits", thus less likely to meet liquidity traders. The bid-ask spread is raised in response. The recursive dynamic model reveals that there is an additional spread-widening effect as market makers earn higher rents due to economies of scope from quote monitoring. Analysis of a NASDAQ-OMX speed upgrade provides supportive evidence.

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Year of publication:	2014
Authors:	Menkveld, Albert J. ; Zoican, Marius A.
Publisher:	Rotterdam [u.a.] : Tinbergen Inst.
Subject:	market microstructure \| trading speed \| information asymmetry \| high-frequency trading \| Elektronisches Handelssystem \| Electronic trading \| Asymmetrische Information \| Asymmetric information \| Marktmikrostruktur \| Market microstructure \| Geld-Brief-Spanne \| Bid-ask spread \| Spekulation \| Speculation \| Liquidität \| Liquidity \| Theorie \| Theory \| Schätzung \| Estimation

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Extent:	Online-Ressource (50 S.) graph. Darst.
Series:	Discussion paper / Tinbergen Institute. - Rotterdam [u.a.] : [Verlag nicht ermittelbar], ISSN 0929-0834, ZDB-ID 2435783-2. - Vol. 2014-097
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: Acrobat Reader
Other identifiers:	hdl:10419/107802 [Handle]
Classification:	G11 - Portfolio Choice ; G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies
Source:	ECONIS - Online Catalogue of the ZBW

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