High-frequency trading and market quality: The case of a “slightly exposed” market

Cumhur Ekinci and Oğuz Ersan

International Review of Financial Analysis, 2022, vol. 79, issue C

Abstract: Impacts of high-frequency trading (HFT) on market quality and various actors have been broadly studied. However, what happens when HFT is not a prominent figure in a market remains relatively unexplored. The paper seeks to answer this question focusing on 30 blue chip stocks in an emerging market, Borsa Istanbul, through Dec 2015 to Mar 2017. Despite a low share in the overall activity, HFT has observable effects, i.e. liquidity provision by non-HFT traders significantly reduces with HFT. Moreover, HFT generates profits on both positive and negative return days. Yet, HFT activity does not have an impact on volatility. These findings raise concerns regarding HFT and show potential externalities are not specific to the markets with HFT dominance.

Keywords: High-frequency trading (HFT); Liquidity provision; Volatility; Returns; Borsa Istanbul (search for similar items in EconPapers)
JEL-codes: G10 G12 G18 G23 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:79:y:2022:i:c:s1057521921003185

DOI: 10.1016/j.irfa.2021.102004

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