We analyze the consequences for liquidity provision of competing market makers operating at high frequency. Competition increases overall liquidity and deters the fast market maker's use of order flow signals. Using various liquidity metrics, we find that the market maker provides more liquidity...

We propose a model of market making where a strategic high frequency trader exploits his speed and informational advantages to place quotes that interact with the orders of low frequency traders. We characterize the optimal market making policy of the high frequency trader analytically. Our...