Throttling Hyperactive Robots - Order to Trade Ratios at the Oslo Stock Exchange
BI Norwegian Business School - Department of Financial Economics
Johannes Atle Skjeltorp
Central Bank of Norway
Bernt Arne Ødegaard
University of Stavanger; Norwegian School of Economics (NHH)
March 18, 2016
We investigate the effects on market quality from the introduction of a fee on excessive order to trade ratios (OTR) at the Oslo Stock Exchange (OSE). Traders reacted to the regulation, increasing the size of the average order, reducing order to trade ratios. Market quality, measured with such common measures as depth, spreads, and realized volatility, remained largely unchanged. This differs sharply from the experience in other market places, such as Italy and Canada, where similar regulatory changes were accompanied by worsening liquidity. The unchanged market quality at the OSE is likely due to a better design of the regulation, which is designed to encourage liquidity supply.
Number of Pages in PDF File: 32
Keywords: High Frequency Trading, Regulation, Order to Trade Ratio
JEL Classification: G10, G20
Date posted: February 22, 2014 ; Last revised: March 20, 2016
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