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
Date Written: May 20, 2018
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: Suggested Citation