City Research Online

Ultra-Fast Activity and Intraday Market Quality

Cartea, A., Payne, R., Penalva, J. and Tapia, M. (2018). Ultra-Fast Activity and Intraday Market Quality. Journal of Banking and Finance, doi: 10.1016/j.jbankfin.2018.12.003

Abstract

This paper studies the intraday relationship between ultra-fast machine-driven activity (UFA) and market quality in automated equity markets. We find that higher UFA is associated with lower intraday market quality (greater quoted and effective spreads and lower depth). This effect is economically significant, and robust to different specifications, endogeneity tests, and alternative measures of UFA. Our results hold after controlling for volatility, periods of unusually high UFA (a proxy for quote stuffing), and periods where UFA is primarily driven by fleeting orders inside the spread (a proxy for spoofing and competition between liquidity providers).

Publication Type: Article
Additional Information: ©2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: High-Frequency Trading; HFT; Algorithmic Trading; Market Quality; Low Latency; Intraday trading; spoofing; fleeting orders; quote stuffing
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/21076
[img] Text - Accepted Version
This document is not freely accessible until 11 June 2020 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

To request a copy, please use the button below.

Request a copy

Export

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login