Economics at your fingertips  

Ultra-fast activity and intraday market quality

Álvaro Cartea, Richard Payne, José Penalva and Mikel Tapia

Journal of Banking & Finance, 2019, vol. 99, issue C, 157-181

Abstract: This paper studies the intraday relationship between ultra-fast machine-driven activity (UFA) and market quality in automated equity markets. We find that higher UFA is associated with lower intraday market quality (greater quoted and effective spreads and lower depth). This effect is economically significant, and robust to different specifications, endogeneity tests, and alternative measures of UFA. Our results hold after controlling for volatility, periods of unusually high UFA (a proxy for quote stuffing), and periods where UFA is primarily driven by fleeting orders inside the spread (a proxy for spoofing and competition between liquidity providers).

Keywords: High-Frequency trading; HFT; Algorithmic trading; Market quality; Low latency; Intraday trading; Spoofing; Fleeting orders; Quote stuffing (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
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:

DOI: 10.1016/j.jbankfin.2018.12.003

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-05-02
Handle: RePEc:eee:jbfina:v:99:y:2019:i:c:p:157-181