Large Trade Anticipation
56 Pages Posted: 25 Apr 2016 Last revised: 13 Apr 2019
Date Written: April 12, 2019
We study whether a subset of high-frequency traders, which we refer to as opportunistic high-frequency traders, systematically anticipate and trade around individual large trades to profit from their price impact. The trading patterns we document using account level transaction data from the Korean Stock Exchange are consistent with opportunistic high-frequency traders anticipating individual large trades and trading opportunistically around them. Our findings are difficult to reconcile with alternative hypotheses that opportunistic high-frequency traders and large traders are trading on a common price signal, or that the observed trading behavior is the byproduct of market making strategies.
Keywords: High Frequency Trading, Large Trade Execution, Order Anticipation, Information Leakage
JEL Classification: G12, G14
Suggested Citation: Suggested Citation