The Information Content of High Frequency Traders Aggressive Orders : Recent Evidences

This empirical study uses a unique recent data set provided by the French regulator "Autorité des Marchés Financiers" and gives some evidence concerning the impact of aggressive orders on the price formation process and the information content of these orders according to the different order flow categories (high frequency traders, agency participants and proprietary participants). As expected, we find that the price impact of aggressive orders consuming exactly the quantity present at the best limit is higher than that of the ones consuming less than the quantity present at the best limit. Furthermore, the price impact is an increasing function with respect to the consumed share in percentage. We show that these price impact disparities are sustainable over time: both price impacts are permanent. On the contrary, the impact of orders consuming more than the quantity present at the best limit starts to diminish one second after the aggressive order. In contrast to previous literature, we find that the aggressive orders of HFTs are more informed than the ones of agency and proprietary members. This new finding may be an indicator of the evolution of high frequency traders activity over the years