Abstract

http://ssrn.com/abstract=2001912
 
 

References (43)



 
 

Citations (14)



 


 



Algorithmic Trading and the Market for Liquidity


Terrence Hendershott


University of California, Berkeley - Haas School of Business

Ryan Riordan


Queen's School of Business

April 11, 2012

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Abstract:     
We examine the role of algorithmic traders (AT) in liquidity supply and demand in the 30 DAX stocks on the Deutsche Boerse in January 2008. AT represent 52% of market order volume and 64% of nonmarketable limit order volume. AT more actively monitor market liquidity than human traders. AT consume liquidity when it is cheap, i.e., when the bid-ask quotes are narrow, and supply liquidity when it is expensive. When spreads are narrow AT are less likely to submit new orders, less likely to cancel their orders, and more likely to initiate trades. AT react more quickly to events and even more so when spreads are wide.

Number of Pages in PDF File: 45

Keywords: algorithmic trading, liquidity, market monitoring

JEL Classification: G10, G14

Accepted Paper Series





Download This Paper

Date posted: February 9, 2012 ; Last revised: April 12, 2012

Suggested Citation

Hendershott, Terrence and Riordan, Ryan, Algorithmic Trading and the Market for Liquidity (April 11, 2012). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2001912 or http://dx.doi.org/10.2139/ssrn.2001912

Contact Information

Terrence J. Hendershott
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
Ryan Riordan (Contact Author)
Queen's School of Business ( email )
Queen's University
Kingston
Ontario, Ontario K7L 3N6
Canada

Feedback to SSRN


Paper statistics
Abstract Views: 2,367
Downloads: 591
Download Rank: 24,719
References:  43
Citations:  14

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.297 seconds