Abstract

http://ssrn.com/abstract=2153272
 
 

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The Diversity of High-Frequency Traders


Björn Hagströmer


Stockholm University - School of Business

Lars L. Norden


Stockholm University - School of Business

May 18, 2013


Abstract:     
The regulatory debate concerning high-frequency trading (HFT) emphasizes the importance of distinguishing different HFT strategies and their influence on market quality. Using data from NASDAQ-OMX Stockholm, we compare market-making HFTs to opportunistic HFTs. We find that market makers constitute the lion’s share of HFT trading volume (65-71%) and limit order traffic (81-86%). Furthermore, market makers have higher order-to-trade ratios and lower latency than opportunistic HFTs. In a natural experiment based on tick size changes, we find that the activity of market-making HFTs mitigates intraday price volatility.

Number of Pages in PDF File: 56

Keywords: High-frequency trading, Market making, Market quality, Volatility, order-to-trade ratio

JEL Classification: G14, G18

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Date posted: September 27, 2012 ; Last revised: May 20, 2013

Suggested Citation

Hagströmer, Björn and Norden, Lars L., The Diversity of High-Frequency Traders (May 18, 2013). Available at SSRN: http://ssrn.com/abstract=2153272 or http://dx.doi.org/10.2139/ssrn.2153272

Contact Information

Björn Hagströmer (Contact Author)
Stockholm University - School of Business ( email )
Stockholm, SE-106 91
Sweden
Lars L. Nordén
Stockholm University - School of Business ( email )
Stockholm, 106 91
Sweden
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