We model endogenous technology adoption and competition among liquidity providers with access to High-Frequency Trading (HFT) technology. HFT technology provides speed and informational advantages. Information advantages may restore excessively toxic markets. Speed technology may reduce resource...

We analyze the likelihood of arms race behavior in markets with liquidity provision by HFTs. Liquidity providers (makers) and liquidity consumers (takers) make costly investments in monitoring speed. Competition among makers and takers induces arms race behavior. However, trade success...