The Rise of Fast Trading: Curse or Blessing for Liquidity?

Forthcoming in Finance, the French Finance Association Review

45 Pages Posted: 10 May 2019 Last revised: 10 Jun 2021

See all articles by Christophe Desagre

Christophe Desagre

Catholic University of Louvain (UCL) - Louvain Finance (LFIN); ICHEC Brussels Management School

Catherine D'Hondt

UCLouvain, Louvain School of Management - Louvain Finance

Mikael Petitjean

LFIN/LIDAM, UCLouvain

Date Written: June 10, 2021

Abstract

We study how market liquidity on Euronext has evolved with the rise of fast trading. We identify fast traders by directly measuring message traffic and the lifetime of orders for every individual market member on Euronext using their identification codes. We observe an overall improvement in terms of liquidity between 2002 and 2006. However, the most exposed stocks to fast trading exhibit the weakest increase in liquidity and lose the liquidity advantage they had before the rise of fast trading.

Keywords: Liquidity, Fast Trading, Stock Exchanges, Full Order Book, Market Member ID, Euronext

JEL Classification: G10, G20

Suggested Citation

Desagre, Christophe and D'Hondt, Catherine and Petitjean, Mikael, The Rise of Fast Trading: Curse or Blessing for Liquidity? (June 10, 2021). Forthcoming in Finance, the French Finance Association Review, Available at SSRN: https://ssrn.com/abstract=3192597 or http://dx.doi.org/10.2139/ssrn.3192597

Christophe Desagre (Contact Author)

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

Chaussée de Binche, 151
Mons, 7000
Belgium

ICHEC Brussels Management School ( email )

Rue au Bois 365
Brussels, 1150
Belgium

Catherine D'Hondt

UCLouvain, Louvain School of Management - Louvain Finance ( email )

151 Chaussée de Binche
Mons, 7000
Belgium

Mikael Petitjean

LFIN/LIDAM, UCLouvain ( email )

Voie du Roman Pays 34
Louvain-La-Neuve, 1348
Belgium

HOME PAGE: http://uclouvain.be/mikael.petitjean

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