Download This PaperComing Early to the Party
65 Pages Posted: 20 Sep 2017
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Coming Early to the Party
Coming Early to the Party
Date Written: September 15, 2017
Abstract
We examine the strategic behavior of High Frequency Traders (HFTs) during the pre-opening phase and the opening auction of the NYSE-Euronext Paris exchange. HFTs actively participate, and profitably extract information from the order flow. They also post "flash crash" orders, to gain time priority. They make profits on their last-second orders; however, so do others, suggesting that there is no speed advantage. HFTs lead price discovery, and neither harm nor improve liquidity. They "come early to the party", and enjoy it (make profits); however, they also help others enjoy the party (improve market quality) and do not have privileges (their speed advantage is not crucial).
Keywords: High-Frequency Traders (HFTs), Proprietary Trading, Opening Auction, Liquidity Provision, Price Discovery
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Leibniz Institute for Financial Research SAFE ( email )
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
HOME PAGE: http://www.safe-frankfurt.de
Ca Foscari University of Venice - Dipartimento di Economia ( email )
Cannaregio 873
Venice, 30121
Italy
Marti G. Subrahmanyam
New York University (NYU) - Leonard N. Stern School of Business ( email )
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Suite 9-160
New York, NY NY 10012
United States