High Frequency Trading and End-of-Day Manipulation

34 Pages Posted: 16 Jul 2012

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Feng Zhan

John Carroll University - Boler School of Business

Michael J. Aitken

Macquarie Graduate School of Management

Date Written: March 30, 2012

Abstract

We examine the impact of higher frequency trading on the frequency and severity of suspected end of day price dislocation cases in 22 stock exchanges around the world over the period January 2003-June 2011. Controlling for country, market, legal and other differences across exchanges and over time, and using a variety of robustness checks including difference-in-differences tests, we show that the presence of high frequency trading in some market has significantly mitigated the frequency and severity of end-of-day manipulation, counter to recent concerns expressed in the media. The effect of HFT is more pronounced than the role of trading rules, surveillance, enforcement and legal conditions in curtailing the frequency and severity of end-of-day manipulation.

Keywords: High frequency trading, End-of-day Manipulation, Trading Rules, Surveillance, Law and Finance

JEL Classification: G12, G14, G18, K22

Suggested Citation

Cumming, Douglas J. and Zhan, Feng and Aitken, Michael J., High Frequency Trading and End-of-Day Manipulation (March 30, 2012). Available at SSRN: https://ssrn.com/abstract=2109920 or http://dx.doi.org/10.2139/ssrn.2109920

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Feng Zhan (Contact Author)

John Carroll University - Boler School of Business ( email )

University Heights, OH 44118-4581
United States

Michael J. Aitken

Macquarie Graduate School of Management ( email )

North Ryde
Sydney, New South Wales 2109
Australia

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