Interactions among high-frequency traders

Evangelos Benos (evangelos.benos@nottingham.ac.uk), James Brugler (jab244@cam.ac.uk), Erik Hjalmarsson (erik.hjalmarsson@economics.gu.se) and Filip Zikes (filip.zikes@bankofengland.co.uk)
Additional contact information
James Brugler: University of Cambridge, Faculty of Economics
Erik Hjalmarsson: University of Gothenburg, Department of Economics
Filip Zikes: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH

No 523, Bank of England working papers from Bank of England

Abstract: Using unique transactions data for individual high-frequency trading (HFT) firms in the UK equity market, we examine if the trading activity of individual HFT firms is contemporaneously and dynamically correlated with each other, and what impact this has on price efficiency. We find that HFT order flow exhibits significantly higher commonality than the order flow of a control group of investment banks, both within and across stocks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information-based and so does not generally contribute to undue price pressure and price dislocations.

Keywords: High-frequency trading; correlated trading strategies; price discovery (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2015-02-20
New Economics Papers: this item is included in nep-mfd and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Interactions among High-Frequency Traders (2017)
Working Paper: Interactions among High-Frequency Traders (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0523

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