High Frequency Traders and Market Structure

The Financial Review, special issue on HFT (Forthcoming)

18 Pages Posted: 17 Jan 2012 Last revised: 10 Jan 2014

See all articles by Albert J. Menkveld

Albert J. Menkveld

Vrije Universiteit Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 9, 2014


The arrival of high-frequency traders (HFTs) coincided with the entry of new markets and, subsequently, strong fragmentation of the order flow. These trends might be related as new markets serve HFTs who seek low fees and high speed. New markets only thrive on competitive price quotes which well-connected HFTs can deliver as they can offload any nonzero position in any market they are connected to. HFTs may benefit or hurt market quality through adverse selection on price quotes, a technology arms race, or high-risk trading strategies.

Keywords: market structure, electronic trading, high-frequency trading

JEL Classification: G1

Suggested Citation

Menkveld, Albert J., High Frequency Traders and Market Structure (January 9, 2014). The Financial Review, special issue on HFT (Forthcoming), Available at SSRN: https://ssrn.com/abstract=1986892 or http://dx.doi.org/10.2139/ssrn.1986892

Albert J. Menkveld (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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