High frequency trading and end-of-day price dislocation

Michael Aitken, Douglas Cumming and Feng Zhan

Journal of Banking & Finance, 2015, vol. 59, issue C, 330-349

Abstract: We show that the presence of high frequency trading (HFT) has significantly mitigated the frequency and severity of end-of-day price dislocation. The effect of HFT is more pronounced on days when end of day price dislocation is more likely to be the result of market manipulation. Moreover, the effect of HFT is more pronounced than the role of trading rules, surveillance, enforcement and legal conditions in curtailing the frequency and severity of end-of-day price dislocation. We show our findings are robust to different proxies of the start of HFT by trade size, cancellation of orders, and co-location.

Keywords: High frequency trading; Price dislocation; Manipulation (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 K22 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Related works:
Working Paper: High frequency trading and end-of-day price dislocation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:59:y:2015:i:c:p:330-349

DOI: 10.1016/j.jbankfin.2015.06.011

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