The present paper considers the issue of High Frequency Trading (HFT) regulation. Rather than discussing macro-level effects of HFT that are still under debate (Sornette & Von der Becke, 2011) its analysis focuses on the issue of regulation from the perspective of HFT firms. Assuming that HFT...

The advances in computer and communication technologies have created new opportunities for improving, extending the application of or even developing new trading strategies. Transformations have been observed both at the level of investment decisions, as well as at the order execution layer....

We study the role of high-frequency trading in a dynamic limit order market. Being fast is valuable because it enables traders to revise outstanding limit orders upon news arrivals when interacting with slow market participants. On the one hand, the existence of fast traders can help to reduce...

We study the role of high-frequency trading in a dynamic limit order market. Fast traders' ability to revise their quotes quickly after news arrivals helps to reduce the inefficiency that is rooted in the risk of being "picked off", which increases trade. However, their presence induces slow...

This paper provides a mathematical analysis of how high frequency traders profi t from their speed with respect to the limit order book. We show that their pro ts can be decomposed into two components. The rest is due to their ability to execute market orders at limit order prices and without...

Classical economic theory suggests that excess returns should be competed away as new participants enter the market. This is especially true for the profits from riskless arbitrage. Yet, there is conflicting evidence in the financial economic literature over whether high frequency trading (HFT)...

In this paper, we investigate the role of proprietary algorithmic traders in facilitating liquidity in a limit order market. Using the order level data from National Stock Exchange of India, we find that they increase limit order supply following periods of high short-term volatility or periods...

Traditional market makers are losing their importance as automated systems have largely assumed the role of liquidity provision in markets. We update the model of Glosten and Milgrom (1985) to analyze this new world: we add multiple securities and introduce an automated market maker who prices...

I investigate whether algorithmic trading (AT) affects voluntary disclosure. I predict that AT's advantage over non-algorithmic investors decreases information acquisition. Because investors are less informed, managers increase disclosure to reduce information asymmetry. I find evidence...