This paper is concerned with how a front-running high-frequency trader (HFT) influences the large trader: whether and under what conditions the latter is harmed or benefited. We study, in the extended Kyle's model, the interactions between a large informed trader and an HFT who can predict the...

We evaluate how the availability of trading venues affects the evolution of dark trading. We show that a regulatory restriction of dark trading at the most prominent platform has a detrimental effect on dark trading activity. Such trading decreases by over 70% over the half-a-year restriction...

Appendix available here: "https://ssrn.com/abstract=3381004" https://ssrn.com/abstract=3381004.We examine the design and effectiveness of the 4pm Fix, the most important benchmark in FX markets, using a unique dataset of trader identified orderbook data from an inter- dealer venue. We propose...

This paper evaluates artificial intelligence's (AI's) foray into financial markets and the resultant implications for theory and practice. I argue for reevaluating mainstream financial theories and proactively building governance frameworks. I also advocate for external audits and oversight that...

Despite the availability of low-cost exchanges, over-the-counter (OTC) trading is pervasive for most assets. We explain the prevalence of OTC trading using a model of adverse selection, in which informed and uninformed investors choose to trade over-the-counter or on an exchange. OTC dealers'...

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...

This paper shows that a key driver of stock exchanges' competition on order-processing speeds is the Order Protection Rule, which requires an exchange to route its customers' orders to other exchanges with better prices. Faster exchanges attract more price-improving limit orders because the...

I investigate the fragmentation under high frequency trading (HFT) popularity. I make a toy model of security exchange market competition. With the friction like the Bertrand competition with differentiated goods, the effect of the number of venues on bid ask spread depends on the business...

This paper examines the efficacy of post-trade transparency regulations like TRACE in over-the-counter (OTC) markets. It is a widely held belief that greater transparency in the trading process benefits investors by reducing opportunities for their exploitation, but I show that this need not be...

High-frequency trading, dark pools, front-running, phantom orders, short selling — the way securities are traded ranks high among today's regulatory challenges. It has become commonplace, both in financial and in academic circles, to call for the government to intervene and impose order. From...