We analyze high frequency trading (HFT) activity in equities during U.S. Treasury permanent open market (POMO) purchases by the Federal Reserve. We construct a model to study HFT quote and trade behavior when private information is released and confirm it empirically. We estimate that HFT firms...

A breakdown in market quality occurs when an order book thins to the point where extreme price movements are observed. These are frequently reversed as the market learns that nothing fundamental has occurred. The daily average breakdown frequency from 1993-2011 is 0.64%, with averages in 2010-11...

Emissions markets have emerged in Europe, the U.S., and around the globe. This paper analyzes the market structure of trading in these instruments. Within the EU ETS, I find, after controlling for a structural break in April 2006, that the major spot and futures exchanges in Europe are...

We compare several models for Bear Stearns' credit default swap spreads estimated via a Markov chain Monte Carlo algorithm. The Bayes Factor selects a CKLS model with GARCH-EPD errors as the best model. This model captures the volatility clustering and extreme tail returns of the swaps during...

This paper analyzes the market microstructure of the European Climate Exchange, the largest EU ETS trading venue. The ECX captures 2/3 of the screen traded market in EUA and more than 90% in CER. Trading volumes are active, with EUA volume doubling in 2009. Spreads range from €0.02 to €0.06...

We consider a model of an internet chat room with free entry but secure identity. Traders exchange messages in real time of both a fundamental and non-fundamental nature. We explore conditions under which traders post truthful information and make trading decisions. We also a describe an...

We analyze the trading activity in an Internet chat room with approximately 1,300 participants. Traders make posts in real time about their activities. We find these traders are more skilled than retail investors analyzed in other studies. 55% make profits after transaction costs, and they earn...

I examine the effects of Nasdaq's introduction of an anonymous trading facility called SIZE. I compare SIZE to competing ECNs in terms of liquidity and market impact. Despite rapid growth, SIZE has not yet attained a significant market share and rarely influences short-run price evolution. I...

This article reviews the history of the recent shift to electronic trading in equity, foreign ex- change and fixed-income markets. We analyze a new data set: the eSpeed (Cantor Fitzgerald) electronic Treasury network. We contrast the market microstructure of eSpeed with the tradi- tional voice...

We analyze the trading activity in an Internet chat room with approximately 1,300 participants. Traders make posts in real time about their activities. We find these traders are more skilled than retail investors analyzed in other studies. 55% make profits after transaction costs, and they earn...