Gone in Sixty Seconds: The Cost of Trading in Long Queues

8 Pages Posted: 4 Oct 2018

Date Written: September 21, 2018

Abstract

The maker-taker pricing model, which pays market participants a rebate for providing liquidity, can lead to long queues at the exchanges employing this fee structure. But some participants may be able to get better queue position than others: high-speed traders can buy speed and data advantages in order to join the queue immediately, whereas slower investor orders are relegated to the back of the line. We analyze publicly available Daily TAQ data to estimate the costs of trading near or at the end of a long queue. By using aggregate quoted size at trade time as a proxy for queue priority, we calculate the impact and scale of performance differences associated with trading in long lines, which our results suggest may impose significant costs on investors.

Keywords: access fees, rebates, maker-taker, queues

JEL Classification: G10, G18

Suggested Citation

Wah, Elaine and Feldman, Stan, Gone in Sixty Seconds: The Cost of Trading in Long Queues (September 21, 2018). Available at SSRN: https://ssrn.com/abstract=3253196 or http://dx.doi.org/10.2139/ssrn.3253196

Elaine Wah (Contact Author)

IEX Group, Inc. ( email )

3 World Trade Center
58th Floor
New York, NY 10007
United States

Stan Feldman

IEX Group, Inc. ( email )

3 World Trade Center
58th Floor
New York, NY 10007
United States

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