High-frequency trading competition

by Jonathan Brogaard, Corey Garriott and Anna Pomeranets

We analyze trading dynamics as successive high-frequency trading (HFT) firms begin to trade stocks in an equity market. Entrants compete with incumbents for volume, and there is crowding out. Earlier entry is associated with larger effects. After Passive HFT entry, incumbent spreads tighten. After Aggressive HFT entry, incumbent order flow loses informedness. Revenue data suggest entry reduces the profitability of HFT activity. The results show that part of the value of HFT comes from its competitiveness.

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Year of publication:	2014
Authors:	Brogaard, Jonathan ; Garriott, Corey ; Pomeranets, Anna
Publisher:	Ottawa : Bank of Canada
Subject:	Financial markets \| Market structure and pricing \| Marktstruktur \| Market structure \| Finanzmarkt \| Financial market \| Elektronisches Handelssystem \| Electronic trading \| Theorie \| Theory

Extent:	Online-Ressource (III, 37 S.) graph. Darst.
Series:	Staff working paper / Bank of Canada. - Ottawa : [Verlag nicht ermittelbar], ISSN 1701-9397, ZDB-ID 2278568-1. - Vol. 2014-19
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: Acrobat Reader Zsfassung in franz. Sprache
Other identifiers:	hdl:10419/103016 [Handle]
Classification:	G20 - Financial Institutions and Services. General ; G14 - Information and Market Efficiency; Event Studies ; L1 - Market Structure, Firm Strategy, and Market Performance
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10010350498