High-frequency trading and institutional trading costs

Marie Chen and Corey Garriott

Journal of Empirical Finance, 2020, vol. 56, issue C, 74-93

Abstract: Using data on Canadian bond futures, we examine how high-frequency traders (HFTs) interact with institutions building large positions. In contrast to recent findings, we find HFTs in the data act as small-sized liquidity suppliers, and we reject the hypothesis that they engage in back running, a predatory trading strategy. Using a quasi-experiment in November 2011, in which a number of HFTs started trading the bond future, we run a difference-in-differences event study and find more competition among HFTs improves implementation shortfall, effective spreads, and short-term price impacts for institutional trading in Canadian bond futures.

Keywords: High-frequency trading; Institutional trading; Predatory trading (search for similar items in EconPapers)
JEL-codes: G14 G20 L10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Working Paper: High-Frequency Trading and Institutional Trading Costs (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:56:y:2020:i:c:p:74-93

DOI: 10.1016/j.jempfin.2019.12.002

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