Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215430
Authors: 
Bellia, Mario
Christensen, Kim
Kolokolov, Aleksey
Pelizzon, Loriana
Renò, Roberto
Year of Publication: 
2020
Series/Report no.: 
SAFE Working Paper No. 270
Abstract: 
We show that High Frequency Traders (HFTs) are not beneficial to the stock market during flash crashes. They actually consume liquidity when it is most needed, even when they are rewarded by the exchange to provide immediacy. The behavior of HFTs exacerbate the transient price impact, unrelated to fundamentals, typically observed during a flash crash. Slow traders provide liquidity instead of HFTs, taking advantage of the discounted price. We thus uncover a trade-o. between the greater liquidity and efficiency provided by HFTs in normal times, and the disruptive consequences of their trading activity during distressed times.
Subjects: 
flash crashes
high-frequency traders (HFTs)
liquidity provision
marketmaking
JEL: 
G10
G14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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