We study fragmentation of equity trading using a model of imperfect competition among exchanges. In the model, increased competition drives down trading fees. However, additional arbitrage opportunities arise in fragmented markets, intensifying adverse selection. These opposing forces imply that...

We study the consequences of high-frequency trading (HFT) — and potential policy responses — via the tradeoff between liquidity and information production. Faster speeds facilitate HFT with consequences for this tradeoff: information production diminishes because informed traders have less...