High Frequency Trading and Mini Flash Crashes

22 Pages Posted: 10 Jan 2013 Last revised: 20 May 2017

Anton Golub

Lykke Corp

John Keane

University of Manchester - School of Computer Science

Ser-Huang Poon

University of Manchester - Manchester Business School

Date Written: November 28, 2012

Abstract

We analyse all Mini Flash Crashes (or Flash Equity Failures) in the US equity markets in the four most volatile months during 2006-2011. In contrast to previous studies, we find that Mini Flash Crashes are the result of regulation framework and market fragmentation, in particular due to the aggressive use of Intermarket Sweep Orders and Regulation NMS protecting only Top of the Book. We find strong evidence that Mini Flash Crashes have an adverse impact on market liquidity and are associated with Fleeting Liquidity.

Keywords: Mini Flash Crash, Flash Crash, Liquidity, High Frequency Trading, Intermarket Sweep Order, ISO, Top of the Book Protection, Regulation National Market System

Suggested Citation

Golub, Anton and Keane, John and Poon, Ser-Huang, High Frequency Trading and Mini Flash Crashes (November 28, 2012). Available at SSRN: https://ssrn.com/abstract=2182097 or http://dx.doi.org/10.2139/ssrn.2182097

Anton Golub (Contact Author)

Lykke Corp ( email )

Baarerstrasse 2
Zug, Zug 6300
Switzerland
00417816108884 (Phone)

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

John Keane

University of Manchester - School of Computer Science ( email )

Manchester M13 9GH
United Kingdom

Ser-Huang Poon

University of Manchester - Manchester Business School ( email )

Crawford House
Oxford Road
Manchester, Manchester M13 9PL
United Kingdom
+44 161 275 4031 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.manchester.ac.uk/research/Ser-huang.poon/

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