Speed competition and strategic trading

Xue-Zhong He and Junqing Kang

Journal of Financial Markets, 2025, vol. 74, issue C

Abstract: Speed competition incentivizes fast traders to trade earlier and temporally fragments the price discovery process. Large traders internalize their price impact and screen trading aggressiveness to resolve the pre-trading uncertainty proportional to the number of traders. Therefore, price discovery in the late period depends on the number of slow traders and the amount of fundamental uncertainty resolved by fast traders. A concentration of fast or slow traders harms price discovery in the late period, generating hump-shape overall price informativeness to speed competition. With fast information diffusion, speed competition harms the overall price informativeness, unless fast traders are high-frequency traders.

Keywords: Speed competition; Information diffusion; Strategic trading; Price informativeness (search for similar items in EconPapers)
JEL-codes: D41 D44 D47 G12 G14 G18 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:74:y:2025:i:c:s1386418125000126

DOI: 10.1016/j.finmar.2025.100972

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