Coming Early to the Party

65 Pages Posted: 20 Sep 2017  

Mario Bellia

Goethe University Frankfurt - Research Center SAFE

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE; Ca Foscari University of Venice

Marti G. Subrahmanyam

New York University - Stern School of Business

Jun Uno

Waseda University

Darya Yuferova

Norwegian School of Economics (NHH) - Department of Finance

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

Bellia, Mario and Pelizzon, Loriana and Subrahmanyam, Marti G. and Uno, Jun and Yuferova, Darya, Coming Early to the Party (September 15, 2017). SAFE Working Paper No. 182. Available at SSRN: https://ssrn.com/abstract=3038699 or http://dx.doi.org/10.2139/ssrn.3038699

Mario Bellia

Goethe University Frankfurt - Research Center SAFE ( email )

Frankfurt am Main
Germany

HOME PAGE: http://safe-frankfurt.de/

Loriana Pelizzon (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Marti G. Subrahmanyam

New York University - Stern School of Business ( email )

Stern School of Business,
44 West 4th Street, Suite 9-68
New York, NY 10012-1126
United States
212-998-0348 (Phone)
212-995-4233 (Fax)

Jun Uno

Waseda University ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku
Tokyo, 1698050
Japan

Darya Yuferova

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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