The Rise of Fast Trading: Curse or Blessing for Liquidity?
60 Pages Posted: 10 May 2019 Last revised: 13 Nov 2019
Date Written: September 6, 2019
We identify fast trading by directly measuring message traffic and the lifetime of orders for all market members on Euronext using their identification codes. We show that the fast-traded stocks exhibit the weakest decrease in both the relative spread and the cost of round trip trade. These stocks could have maintained their liquidity edge observed before the rise of fast trading, had they been better immune from it.
Keywords: Liquidity, Fast Trading, Stock Exchanges, Full Order Book, Market Member ID, Euronext
JEL Classification: G10, G20
Suggested Citation: Suggested Citation