Algorithmic trading has sharply increased over the past decade. Equity market liquidity has improved as well. Are the two trends related? For a recent five-year panel of New York Stock Exchange (NYSE) stocks, we use a normalized measure of electronic message traffic (order submissions,...

Allegations have been made that High Frequency Traders (HFTs) prey on other market participants and only intermediate trades that would have taken place without their involvement. There are claims that HFTs can predict when orders are going to arrive at different trading venues and trade in...