After exchanges and alternative trading venues have introduced electronic execution mechanisms worldwide, the focus of the securities trading industry shifted to the use of fully electronic trading engines by banks, brokers and their institutional customers. These Algorithmic Trading engines...

Signed customer order flow correlates with permanent price changes in equity and nonequity markets. We exploit macro news events in the 30Y treasury futures market to identify causality from customer flow to riskfree rates. We remove the positive feedback trading part and establish that, in the...

A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general formula for the martingale price of a European call option. A...

This paper studies the market quality of an internalization system which is designed as part of an open limit order book (the Xetra system operated by Deutsche Börse AG). The internalization sys-tem (Xetra BEST) guarantees a price improvement over the inside spread in the Xetra order book. We...

The authors model trades-through, i.e. transactions that reach at least the second level of limit orders in an order book. Using tick-by-tick data on Euronext-traded stocks, they show that a simple bivariate Hawkes process fits nicely their empirical observations of tradesthrough. The authors...

Competition for order flow can be characterized as a coordination game with multiple equilibria. Analyzing competition between dealer markets and a crossing network, we show that the crossing network is more stable for lower traders’ disutilities from unexecuted orders. By introducing private...

We introduce a copula-based dynamic model for multivariate processes of (non-negative) high-frequency trading variables revealing time-varying conditional variances and correlations. Modeling the variables' conditional mean processes using a multiplicative error model we map the resulting...