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...

We study liquidity provision by competitive high-frequency trading firms (HFTs) in a dynamic trading model with private information. Liquidity providers face adverse selection risk from trading with privately informed investors and from trading with other HFTs that engage in latency arbitrage...

We study performance and competition among high-frequency traders (HFTs). We construct measures of latency and find that differences in relative latency account for large differences in HFTs' trading performance. HFTs that improve their latency rank due to colocation upgrades see improved...

Determinants of bid-ask spread have been explored significantly for low-frequency datasets in many developed markets. Researchers have identified share price, traded volume, market-capitalization, return volatility, and number of trades as the prime spread drivers. However, the validity of these...