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Throttling Hyperactive Robots - Order to Trade Ratios at the Oslo Stock Exchange

26 Pages Posted: 22 Feb 2014 Last revised: 19 May 2017

Kjell Jorgensen

BI Norwegian Business School - Department of Financial Economics

Johannes Atle Skjeltorp

Central Bank of Norway

Bernt Arne Ødegaard

University of Stavanger

Date Written: May 15, 2017

Abstract

We investigate the effects of introducing a fee on excessive order to trade ratios (OTR) on market quality at the Oslo Stock Exchange (OSE). We find that traders reacted to the regulation, as measured OTRs fell. However, market quality, measured with depth, spreads, and realized volatility, remained largely unaffected. This result differs sharply from the experience in other markets, such as Italy and Canada, where similar regulatory changes were accompanied by a worsening of liquidity. The unchanged market quality at the OSE is likely due to the different design of the regulation, which is tailored to encourage liquidity supply.

Keywords: High Frequency Trading, Regulation, Order to Trade Ratio

JEL Classification: G10, G20

Suggested Citation

Jorgensen, Kjell and Skjeltorp, Johannes Atle and Ødegaard, Bernt Arne, Throttling Hyperactive Robots - Order to Trade Ratios at the Oslo Stock Exchange (May 15, 2017). Available at SSRN: https://ssrn.com/abstract=2399225 or http://dx.doi.org/10.2139/ssrn.2399225

Kjell Jorgensen

BI Norwegian Business School - Department of Financial Economics ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.bi.no

Johannes Atle Skjeltorp

Central Bank of Norway ( email )

P.O. Box 1179
Oslo, N-0107
Norway

HOME PAGE: http://www.norges-bank.no/research/skjeltorp/

Bernt Arne Ødegaard (Contact Author)

University of Stavanger ( email )

UiS Business School
Stavanger, NO-4036
Norway

HOME PAGE: http://www1.uis.no/ansatt/odegaard

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