87 Pages Posted: 18 Apr 2017
Date Written: April 15, 2017
We study whether the presence of low-latency traders (including high-frequency traders (HFTs)) in the pre-opening period contributes to market quality, defined by price discovery and liquidity provision, in the opening auction. We use a unique dataset from the Tokyo Stock Exchange (TSE) based on server-IDs and find that HFTs dynamically alter their presence in different stocks and on different days. In spite of the lack of immediate execution, about one quarter of HFTs participate in the pre-opening period, and contribute significantly to market quality in the pre-opening period, the opening auction that ensues and the continuous trading period. Their contribution is largely different from that of the other HFTs during the continuous period.
Keywords: High-Frequency Traders (HFTs), Pre-Opening, Opening Call Auction, Price Discovery, Liquidity Provision
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Bellia, Mario and Pelizzon, Loriana and Subrahmanyam, Marti G. and Uno, Jun and Yuferova, Darya, Low-Latency Trading and Price Discovery: Evidence from the Tokyo Stock Exchange in the Pre-Opening and Opening Periods (April 15, 2017). Available at SSRN: https://ssrn.com/abstract=2953611 or http://dx.doi.org/10.2139/ssrn.2953611