High-Frequency Trading in the U.S. Treasury Market Around Macroeconomic News Announcements

HKIMR Working Paper No.19/2018

48 Pages Posted: 27 Aug 2018

See all articles by George J. Jiang

George J. Jiang

Washington State University

Ingrid Lo

Bank of Canada

Giorgio Valente

Hong Kong Institute for Monetary and Financial Research (HKIMR)

Date Written: August 17, 2018

Abstract

This paper investigates high-frequency (HF) trading in the U.S. Treasury market around macroeconomic news announcements. After identifying HF market and limit orders based on the speed of their placement alteration and cancellation deemed beyond manual ability, we use the introduction of the co-location facility (i-Cross) by BrokerTec as an exogenous instrument to assess the impact of HF trading on market liquidity and price efficiency. We find that HF trading increases after news announcements and improves price efficiency. However, it has a negative impact on liquidity, as it widens spreads before announcements and lowers depth of the order book after announcements.

Keywords: High-frequency Trading; Macroeconomic News Announcements; U.S. Treasury Market; Market Liquidity; Price Efficiency

JEL Classification: G10, G12, G14

Suggested Citation

Jiang, George and Lo, Ingrid and Valente, Giorgio, High-Frequency Trading in the U.S. Treasury Market Around Macroeconomic News Announcements (August 17, 2018). HKIMR Working Paper No.19/2018. Available at SSRN: https://ssrn.com/abstract=3233332 or http://dx.doi.org/10.2139/ssrn.3233332

George Jiang (Contact Author)

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

Ingrid Lo

Bank of Canada ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

Giorgio Valente

Hong Kong Institute for Monetary and Financial Research (HKIMR) ( email )

One Pacific Place, 10th Floor
88 Queensway
Hong Kong
China

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