High-Frequency Trading and the Execution Costs of Institutional Investors

Michael Goldstein (), Jonathan Brogaard, Terrence Hendershott, Stefan Hunt and Carla Ysusi

The Financial Review, 2014, vol. 49, issue 2, 345-369

Abstract: This paper studies whether high-frequency trading (HFT) increases the execution costs of institutional investors. We use technology upgrades that lower the latency of the London Stock Exchange to obtain variation in the level of HFT over time. Following upgrades, the level of HFT increases. Around these shocks to HFT institutional traders’ costs remain unchanged. We find no clear evidence that HFT impacts institutional execution costs.

Date: 2014
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