Anticipatory Traders and Trading Speed

51 Pages Posted: 16 May 2015 Last revised: 14 Dec 2017

See all articles by Raymond P.H. Fishe

Raymond P.H. Fishe

University of Richmond - E. Claiborne Robins School of Business

Richard Haynes

Commodity Futures Trading Commission (CFTC)

Esen Onur

Commodity Futures Trading Commission (CFTC)

Date Written: November 1, 2017

Abstract

We examine whether speed is an important characteristic of traders who anticipate local price trends. These anticipatory participants correctly trade prior to the overall market and systematically act before other participants. They use manual and algorithmic order entry methods, but most are not fast enough to be high frequency traders (HFTs). Those anticipating price trends have impacts as if they are informed traders, while the case for anticipatory participants affecting the volume of other traders is rejected. A follow-up sample shows significant attrition in accounts and difficulty maintaining the anticipatory strategies. To identify anticipatory traders, we devise novel methods to isolate local price trends using order book data from the WTI crude oil futures market.

Keywords: Algorithmic traders, Manual traders, Cancellation rates, Order book, WTI crude oil futures, Local price trends

JEL Classification: G10, G13

Suggested Citation

Fishe, Raymond P.H. and Haynes, Richard and Onur, Esen, Anticipatory Traders and Trading Speed (November 1, 2017). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2606949 or http://dx.doi.org/10.2139/ssrn.2606949

Raymond P.H. Fishe (Contact Author)

University of Richmond - E. Claiborne Robins School of Business ( email )

1 Gateway Road
Richmond, VA 23173
United States
804-289-8549 (Phone)

Richard Haynes

Commodity Futures Trading Commission (CFTC) ( email )

1155 21st Street NW
Washington, DC 20581
United States

Esen Onur

Commodity Futures Trading Commission (CFTC) ( email )

1155 21st Street NW
Washington, DC 20581
United States

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