Competition among High-Frequency Traders, and Market Quality

NYU Stern Microstructure Meeting 2013

52 Pages Posted: 14 May 2013 Last revised: 25 Apr 2019

See all articles by Johannes Breckenfelder

Johannes Breckenfelder

European Central Bank (ECB) - Financial Research

Multiple version iconThere are 2 versions of this paper

Date Written: April 23, 2019


We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size reform - which we use to disentangle the effects of the rising share of high-frequency trading in the market from the effects of high-frequency competition. We find that when HFTs compete, their speculative trading increases. As a result, market liquidity deteriorates and short-term volatility rises. Our findings hold for a variety of market quality and high-frequency trading behavior measures.

Keywords: high-frequency trading, competition, high-frequency trading strategies, tick size reform

JEL Classification: G12, G14, G15, G18, G23, D4, D61

Suggested Citation

Breckenfelder, Johannes, Competition among High-Frequency Traders, and Market Quality (April 23, 2019). NYU Stern Microstructure Meeting 2013. Available at SSRN: or

Johannes Breckenfelder (Contact Author)

European Central Bank (ECB) - Financial Research ( email )

Sonnemannstrasse 20
D-60314 Frankfurt am Main


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