Can High-Frequency Traders Game Futures?

Journal of Trading, Forthcoming

Posted: 5 Feb 2012 Last revised: 8 Mar 2012

See all articles by Irene Aldridge

Irene Aldridge

AbleMarkets.com; Cornell University; BigDataFinance.org; ABLE Alpha Trading, LTD

Date Written: January 3, 2012

Abstract

This article describes a simple test to assess the feasibility of high-frequency “pump-and-dump” arbitrage. Using the tick data for Eurex Eurobund futures for 2009-2010 period, the article shows practical implementation of the test. The Eurobund futures data does not support feasibility of high frequency pump-and-dump. The data instead shows that Eurobund futures are resilient to large trade sizes, a welcome feature for large institutional investors concerned about quality of execution of their orders in the presence of high frequency traders.

Keywords: high-frequency trading, futures, arbitrage, Eurobund, HFT, large orders, market impact

JEL Classification: G12

Suggested Citation

Aldridge, Irene, Can High-Frequency Traders Game Futures? (January 3, 2012). Journal of Trading, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1999089

Irene Aldridge (Contact Author)

AbleMarkets.com ( email )

New York, NY 10128
United States

HOME PAGE: http://www.AbleMarkets.com

Cornell University ( email )

Ithaca, NY 14853
United States

BigDataFinance.org ( email )

United States

ABLE Alpha Trading, LTD ( email )

New York, NY 10004
United States

HOME PAGE: http://www.ablealpha.com

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