US Cross-Listing and Domestic High-Frequency Trading: Evidence from Canadian Stocks

We find that US cross-listing of Canadian stocks enhances domestic high-frequency trading (HFT) activity in the form of both opportunistic trading and market-making. First, US cross-listing boosts HFT low-latency cross-border arbitrage. This highly correlated HFT arbitrage activity across markets enhances stock price efficiency by correcting mispricing. Second, US cross-listing leads to an increase in news trading activity by high-frequency traders around US public macro-news releases. Finally, cross-listing increases a stock’s reliance on high-frequency market makers to provide liquidity. Yet, we find no evidence of higher fragility in liquidity supply after cross-listing.

Keywords: US cross-listing, high-frequency trading, cross-market arbitrage, US news announcements, liquidity, equity markets

JEL Classification: G12, G14, G15, G23

Suggested Citation: Suggested Citation

Dodd, Olga and Frijns, Bart and Indriawan, Ivan and Pascual Gascó, Roberto, US Cross-Listing and Domestic High-Frequency Trading: Evidence from Canadian Stocks (July 7, 2021). Available at SSRN: https://ssrn.com/abstract=3825499 or http://dx.doi.org/10.2139/ssrn.3825499