Abstract

https://ssrn.com/abstract=2619686
 


 



High-Frequency Trading around Large Institutional Orders


Vincent van Kervel


Pontifical Catholic University of Chile; Tilburg Law and Economics Center (TILEC)

Albert J. Menkveld


VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

January 29, 2016

WFA Paper, 2016

Abstract:     
Liquidity suppliers lean against the wind. We analyze whether high-frequency traders (HFTs) lean against large institutional orders that execute through a series of child orders. The alternative is that HFTs go “with the wind” and trade in the same direction. We find that HFTs initially lean against orders but eventually turn around and go with them for long-lasting orders. This pattern explains why institutional trading cost is 46% lower when HFTs lean against the order (by one standard deviation) but 169% higher when they go with it. Further analysis supports recent theory, suggesting HFTs “back-run” on informed orders.

Number of Pages in PDF File: 48

Keywords: HFT, Institutional investors, Implementation Shortfall

JEL Classification: G10, G14, G15


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Date posted: June 18, 2015 ; Last revised: February 24, 2016

Suggested Citation

van Kervel, Vincent and Menkveld, Albert J., High-Frequency Trading around Large Institutional Orders (January 29, 2016). WFA Paper, 2016. Available at SSRN: https://ssrn.com/abstract=2619686 or http://dx.doi.org/10.2139/ssrn.2619686

Contact Information

Vincent Van Kervel (Contact Author)
Pontifical Catholic University of Chile ( email )
Av Libertador General Bernardo O'Higgins 340
Santiago, Región Metropolitana 8331150
Chile
Tilburg Law and Economics Center (TILEC) ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Albert J. Menkveld
VU University Amsterdam ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)
Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )
Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands
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