Algorithmic Trading and Market Quality

35 Pages Posted: 24 Sep 2020

See all articles by John Paul Broussard

John Paul Broussard

University of Oklahoma; Rutgers University; Estonian Business School

Andrei L. Nikiforov

Rutgers University

Sergey Osmekhin

affiliation not provided to SSRN

Date Written: August 14, 2020

Abstract

A unique data set from NASDAQ OMX Nordic allows a deep analysis of trader types’ activity and provides evidence on the roles played in the trading ecosystem. We specifically investigate the impact of algorithmic traders on market quality relative to the activities of other market participants under various conditions. We find that relative to other traders, algorithmic traders contribute to lower spreads, especially during highly volatile markets, and provide more shares traded at the NBBO. We also identify the main determinants of algorithmic traders’ liquidity provisions and order cancellation patterns.

Keywords: HFT, Algorithmic Trading, Market Quality

JEL Classification: G20, G14, L10

Suggested Citation

Broussard, John Paul and Nikiforov, Andrei L. and Osmekhin, Sergey, Algorithmic Trading and Market Quality (August 14, 2020). Available at SSRN: https://ssrn.com/abstract=3673881 or http://dx.doi.org/10.2139/ssrn.3673881

John Paul Broussard (Contact Author)

University of Oklahoma ( email )

Norman, OK 73019
United States
4053255591 (Phone)

HOME PAGE: http://https://www.ou.edu/price/finance/faculty/john-paul-broussard

Rutgers University ( email )

Camden, NJ 08102
United States
+18562256647 (Phone)

Estonian Business School ( email )

A. Lauteri 3
Tallinn, 10114
Estonia

Andrei L. Nikiforov

Rutgers University ( email )

Camden, NJ 08102
United States
856-225-6594 (Phone)

Sergey Osmekhin

affiliation not provided to SSRN

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