Download This PaperPre-Opening Period, High-Frequency Trading, and Market Quality
SAFE Working Paper No. 144
49 Pages Posted: 21 Sep 2016 Last revised: 7 Jun 2024
Date Written: May 31, 2024
Abstract
Is the participation of High-Frequency Traders (HFTs) in the pre-opening period detrimental to market quality in the continuous trading period? Using data provided by the Tokyo Stock Exchange (TSE) with trader identifiers, we address this question and show that only 29% of HFTs are active during the pre-opening period (Active HFTs), and the strategies employed in the continuous trading period by such Active HFTs are consistent with voluntary marketmaking. Other HFTs exhibit traits of opportunistic traders as manifested by their role in price discovery and liquidity consumption. Thus, voluntary participation of HFTs in the pre-opening period should not be discouraged.
Keywords: Pre-Opening, Opportunistic Trading, Voluntary Market-Making, High-Frequency Traders (HFTs)
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Leibniz Institute for Financial Research SAFE ( email )
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Ca Foscari University of Venice - Dipartimento di Economia ( email )
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Italy
Marti G. Subrahmanyam
New York University (NYU) - Leonard N. Stern School of Business ( email )
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United States