The effect of NYSE American’s latency delay on informed trading

Jeremy Morris and Ke Xu

International Review of Financial Analysis, 2025, vol. 105, issue C

Abstract: Informed high-frequency traders pose a major risk to liquidity providers in financial markets due to adverse selection, which can result in market failure. To mitigate this risk, some exchanges have implemented speed bumps which delay trades. Using trade and quote (TAQ) data of 50 stocks on the NYSE American and the NASDAQ from May 2017 to August 2017, we identify the impact of a trading delay of 350 microseconds on the probability of informed trading using difference-in-differences estimation. We find a statistically significant decline in the probability of informed trading due to the implementation of the speed bump on the NYSE American stock exchange.

Keywords: Market microstructure; financial economics; latency delay; high-frequency trading; informed trading (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521925004533
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:105:y:2025:i:c:s1057521925004533

DOI: 10.1016/j.irfa.2025.104366

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().