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The diversity of high-frequency traders
Stockholm University, Faculty of Social Sciences, School of Business. (Finance)
Stockholm University, Faculty of Social Sciences, School of Business. (Finance)
2013 (English)In: Journal of financial markets, ISSN 1386-4181, E-ISSN 1878-576X, Vol. 16, no 4, 741-770 p.Article in journal (Refereed) Published
Abstract [en]

The regulatory debate concerning high-frequency trading (HFT) emphasizes the importance of distinguishing different HFT strategies and their influence on market quality. Using data from NASDAQ-OMX Stockholm, we compare market-making HFTs to opportunistic HFTs. We find that market makers constitute the lion's share of HFT trading volume (63–72%) and limit order traffic (81–86%). Furthermore, market makers have higher order-to-trade ratios and lower latency than opportunistic HFTs. In a natural experiment based on tick size changes, we find that the activity of market-making HFTs mitigates intraday price volatility.

Place, publisher, year, edition, pages
Elsevier, 2013. Vol. 16, no 4, 741-770 p.
Keyword [en]
High-frequency trading, Market making, Market quality, Volatility
National Category
Business Administration
Identifiers
URN: urn:nbn:se:su:diva-96300DOI: 10.1016/j.finmar.2013.05.009ISI: 000326555600005OAI: oai:DiVA.org:su-96300DiVA: diva2:665309
Available from: 2013-11-19 Created: 2013-11-19 Last updated: 2017-12-06Bibliographically approved

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