Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208324
Authors: 
Breckenfelder, Johannes
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2290
Abstract: 
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 reform - which we use to disentangle the effects of the rising share of high-frequency trading in the market from the effects of high-frequency competition. We find that when HFTs compete, their speculative trading increases. As a result, market liquidity deteriorates and short-term volatility rises. Our findings hold for a variety of market quality and high-frequency trading behavior measures.
Subjects: 
high-frequency trading
competition
high-frequency trading strategies
tick size reform
JEL: 
G12
G14
G15
G18
G23
D4
D61
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3552-4
Document Type: 
Working Paper

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