Forthcoming, Journal of Financial Markets
86 Pages Posted: 2 Aug 2012 Last revised: 31 May 2017
Date Written: June 15, 2013
This paper provides evidence regarding high-frequency trader (HFT) trading performance, trading costs, and effects on market efficiency using a sample of NASDAQ trades and quotes that directly identifies HFT participation. I find that HFTs engage in successful intra-day market timing, spreads are wider when HFTs provide liquidity and tighter when HFTs take liquidity, and prices incorporate information from order flow and market-wide returns more efficiently on days when HFT participation is high.
Keywords: high-frequency trading, trading performance, intraday return predictability, VWAP, trading costs, adverse selection, market efficiency
JEL Classification: G1, G2
Suggested Citation: Suggested Citation
Carrion, Allen, Very Fast Money: High-Frequency Trading on the NASDAQ (June 15, 2013). Forthcoming, Journal of Financial Markets. Available at SSRN: https://ssrn.com/abstract=2122716 or http://dx.doi.org/10.2139/ssrn.2122716