Wait or Trade?

50 Pages Posted: 7 Nov 2015 Last revised: 5 Jun 2019

See all articles by Darya Yuferova

Darya Yuferova

Norwegian School of Economics (NHH) - Department of Finance

Date Written: June 3, 2019

Abstract

I study the effect of high-frequency trading (HFT) activity on the strategic choice of informed traders for market (impatient, liquidity-consuming, "trade") versus limit (patient, liquidity-providing, "wait") orders. My findings show that an exogenous increase in HFT activity around the introduction of the NYSE Hybrid Market leads to a significant increase of both impatient and patient informed trading, with the latter effect being the dominant one. In other words, an exogenous increase in HFT activity relaxes the trade-off between price informativeness and market liquidity (especially for large stocks).

Keywords: Price Discovery, Limit Order Book, Liquidity Provision, High-Frequency Trading.

JEL Classification: G14

Suggested Citation

Yuferova, Darya, Wait or Trade? (June 3, 2019). Available at SSRN: https://ssrn.com/abstract=2686082 or http://dx.doi.org/10.2139/ssrn.2686082

Darya Yuferova (Contact Author)

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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