High-Frequency Trading and Its Role in Fragmented Markets

Proceedings of the 23rd European Conference on Information Systems (ECIS 2015), Münster, 2015

18 Pages Posted: 29 Apr 2015 Last revised: 8 Apr 2016

See all articles by Martin Haferkorn

Martin Haferkorn

Goethe University Frankfurt Faculty of Economics and Business Administration; European Securities and Markets Authority (ESMA)

Date Written: April 28, 2015

Abstract

The financial services industry is among the leading industries in IT-spending. Still, little research exists which investigates how IT influences the financial services sector. Against this background, we study how a technology which emerged within the last years affects securities trading: High-Frequency Trading (HFT). Hereby, we focus on HFT and its impact on market efficiency. On the basis of a long-term analysis, we find that HFT decreases price dispersion among two distant markets. Analyzing the introduction of the German HFT Act, we further observe that the price dispersion between two leading trading venues for German blue chip securities increased. We conclude that HFT increases market efficiency in the European market landscape by transmitting information between distant markets.

Keywords: German High-Frequency Trading Act, Fragmentation, High-Frequency Trading, Market Efficiency, Securities Trading

JEL Classification: G12, G14, G18, G28

Suggested Citation

Haferkorn, Martin and Haferkorn, Martin, High-Frequency Trading and Its Role in Fragmented Markets (April 28, 2015). Proceedings of the 23rd European Conference on Information Systems (ECIS 2015), Münster, 2015, Available at SSRN: https://ssrn.com/abstract=2600240.

Martin Haferkorn (Contact Author)

European Securities and Markets Authority (ESMA) ( email )

201-203 Rue de Bercy
​Paris, 75012
France

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

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