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Latency arbitrage when markets become faster

Hollifield, Burton; Sandås, Patrik; Todd, Andrew - 2017

We measure the incidence of latency arbitrage for cross-listed stocks around the time of an exogenous shock that made … markets. We document a sharp decline in the incidence of cross-market arbitrage opportunities across the Nordic markets for … cross-listed stocks from 2009 to 2010 and later. Over the five year sample period 77% of the observed cross-market arbitrage …

Persistent link: https://www.econbiz.de/10011657416

Judgement day : algorithmic trading around the Swiss franc cap removal

Breedon, Francis J.; Chen, Louisa; Ranaldo, Angelo; … - 2018

A key issue raised by the rapid growth of computerised algorithmic trading is how it responds in extreme situations. Using data on foreign exchange orders and transactions that includes identification of algorithmic trading, we find that this type of trading contributed to the deterioration of...

Persistent link: https://www.econbiz.de/10011906367

Effective trade execution

Cesari, Riccardo; Marzo, Massimiliano; Zagaglia, Paolo - 2012 - This version: June 2012

This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high frequency trading technology. Special order types are...

Persistent link: https://www.econbiz.de/10011731511

Analysis of binary trading patterns in Xetra

Maurer, Kai-Oliver; Schäfer, Carsten - 2010

This paper proposes the Shannon entropy as an appropriate one-dimensional measure of behavioural trading patterns in financial markets. The concept is applied to the illustrative example of algorithmic vs. non-algorithmic trading and empirical data from Deutsche Börse's electronic cash equity...

Persistent link: https://www.econbiz.de/10003980635

High-frequency trading around large institutional orders

Kervel, Vincent van; Menkveld, Albert J. - 2017

Liquidity suppliers lean against the wind. We analyze whether high-frequency traders (HFTs) lean against large institutional orders that execute through a series of child orders. The alternative is HFTs trading "with the wind," that is, in the same direction. We find that HFTs initially lean...

Persistent link: https://www.econbiz.de/10011725287

Competition among high-frequency traders, and market quality

Breckenfelder, Johannes - 2019

We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size...

Persistent link: https://www.econbiz.de/10012016546

Fast trading and the virtue of entropy : evidence from the foreign exchange market

Corsetti, Giancarlo; Lafarguette, Romain; Mehl, Arnaud - 2019

Focusing on the foreign exchange reaction to macroeconomic announcements, we show that fast trading is positively and significantly correlated with the entropy of the distribution of quoted prices in reaction to news: a larger share of fast trading increases the degree of diversity of quotes in...

Persistent link: https://www.econbiz.de/10012037341

Broker colocation and the execution costs of customer and proprietary orders

Sagade, Satchit; Scharnowski, Stefan; Westheide, Christian - 2022 - This version: October 14, 2022

Colocation services offered by stock exchanges enable market participants to achieve execution costs for large orders that are substantially lower and less sensitive to transacting against high-frequency traders. However, these benefits manifest only for orders executed on the colocated brokers'...

Persistent link: https://www.econbiz.de/10013459922

Alternative trading systems in the corporate bond market

Kozora, Matthew; Mizrach, Bruce Marshall; Peppe, Matthew; … - 2020

We investigate the trading of corporate bonds on alternative trading system (ATS) platforms. We draw a key distinction between request-for-quote (RFQ) and electronic communication network (ECN) trading protocols, which balance investors' preference for immediacy and anonymity. Trades on ATS...

Persistent link: https://www.econbiz.de/10012257056

Electronic trading in OTC markets vs. centralized exchange

Liu, Ying; Vogel, Sebastian; Zhang, Yuan - 2017

We model a two-tiered market structure in which an investor can trade an asset on a trading platform with a set of dealers who in turn have access to an interdealer market. The investor's order is informative about the asset's payoff and dealers who were contacted by the investor use this...

Persistent link: https://www.econbiz.de/10011877487

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