Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142126
Authors: 
Schlepper, Kathi
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 15/2016
Abstract: 
In this work, I study the impact of high-frequency trading (HFT) on price discovery and volatility in the Bund futures market. Using a new dataset based on microseconds, the focus of the study is on the reaction of high-frequency traders (HFTs) to major macroeconomic news events. I show that through their fast and strong reaction to news, HFTs contribute more to price discovery compared to Non-HFTs, but also add a higher share to noise than to permanent volatility. Moreover, I find evidence that HFTs tend to supply less liquidity after an unexpected rise in market volatility and prior to upcoming macroeconomic news events. These findings suggest that in times of high market stress, HFT behavior may exacerbate intraday price volatility and amplify the risk of market disruptions in fixed income markets.
Subjects: 
High-Frequency Trading
Price Discovery
Volatility
JEL: 
G10
G12
G14
ISBN: 
978-3-95729-256-8
Document Type: 
Working Paper

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