The Impact of HFT on the Speed of Adjustment to New Information: Evidence from Interest Rate Derivatives

20 Pages Posted: 1 Feb 2019 Last revised: 27 Feb 2019

See all articles by Alex Frino

Alex Frino

University of Wollongong

Michael Garcia

University of Wollongong

Ivy Zhou

University of Wollongong - School of Accounting, Economics & Finance

Date Written: May 20, 2018

Abstract

This study investigates the impact of HFT on the intraday speed of adjustment and price discovery following scheduled macroeconomic announcements for interest rate derivatives. Our results demonstrate that the speed of adjustment to new information has been improved for both interest rate derivatives, exchange-traded futures and over-the-counter (OTC) traded swaps, in the presence of HFT. In addition, we examine the lead-lag effects between swaps and futures during macro information releases in the pre- and post-colocation periods. We find that HFT strengthens the lead effects of futures on scheduled announcement days.


This research was funded under Corporations regulation 7.5.88 through the use of excess funds from the SFEFF.

Keywords: Price discovery; Futures; Swaps; High frequency trading

JEL Classification: G14; G15

Suggested Citation

Frino, Alex and Garcia, Michael and Zhou, Ivy Zeyang, The Impact of HFT on the Speed of Adjustment to New Information: Evidence from Interest Rate Derivatives (May 20, 2018). Available at SSRN: https://ssrn.com/abstract=3326300 or http://dx.doi.org/10.2139/ssrn.3326300

Alex Frino

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Michael Garcia (Contact Author)

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Ivy Zeyang Zhou

University of Wollongong - School of Accounting, Economics & Finance ( email )

Northfields Avenue
Wollongong, NSW 2522
Australia

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