High-Frequency Trading Strategies
68 Pages
Posted: 25 May 2017
Babson College - Finance Division
University of Sydney Business School
University of Sydney Business School
Date Written: May 23, 2017
Abstract
Examining the order book imbalance immediately before each order submission, cancelation and trade, we show high frequency traders (HFT) 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. However, by competing with non-HFT limit orders, HFT impose a welfare externality by crowding out slower non-HFT limit orders. Overall, we document an important information channel driving HFT behavior.
Keywords: High-frequency trading, institutional traders, retail traders, limit order book
JEL Classification: G10, G14
Suggested Citation:
Suggested Citation
Goldstein, Michael A. and Kwan, Amy and Philip, Richard, High-Frequency Trading Strategies (May 23, 2017). Available at SSRN: https://ssrn.com/abstract=2973019
