High-Frequency Trading Strategies

45 Pages Posted: 25 May 2017 Last revised: 23 Jul 2020

See all articles by Michael A. Goldstein

Michael A. Goldstein

Babson College - Finance Division

Amy Kwan

University of Sydney Business School

Richard Philip

University of Sydney Business School

Date Written: July 23, 2020

Abstract

We examine the effect of high frequency trading on market quality from the
perspective of a limit order trader. By competing with slower limit order traders, high
frequency traders (HFT) impose a welfare externality by crowding out slower non-HFT
limit orders. The order book imbalance immediately before each order submission,
cancelation and trade suggests that high frequency traders strategically use limit order
book information to supply liquidity on the thick side of the order book and demand
liquidity from the thin side. This strategic behavior is more pronounced during volatile
periods and when trading speeds increase.

Keywords: High-frequency trading, institutional investors, retail investors

JEL Classification: G14; G15

Suggested Citation

Goldstein, Michael A. and Kwan, Amy and Philip, Richard, High-Frequency Trading Strategies (July 23, 2020). Available at SSRN: https://ssrn.com/abstract=2973019 or http://dx.doi.org/10.2139/ssrn.2973019

Michael A. Goldstein

Babson College - Finance Division ( email )

320 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4402 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/goldstein/

Amy Kwan (Contact Author)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Richard Philip

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
2,187
Abstract Views
6,489
rank
6,998
PlumX Metrics