High Frequency Trading in the Equity Markets During US Treasury POMO

Cheng Gao and Bruce Mizrach
Additional contact information
Cheng Gao: Rutgers University

A chapter in Uncertainty, Expectations and Asset Price Dynamics, 2018, pp 81-103 from Springer

Abstract: Abstract We analyze high frequency trading (HFT) activity in equities during US Treasury permanent open market (POMO) purchases by the Federal Reserve. We construct a model to study HFT quote and trade behavior when private information is released and confirm it empirically. We estimate that HFT firms reduce their inside quote participation by up to 8% during POMO auctions. HFT firms trade more aggressively, and they supply less passive liquidity to non-HFT firms. Market impact also rises during Treasury POMO. Aggressive HFT trading becomes more consistently profitable, and HFT firms earn a higher return per share. We also estimate that HFT firms earn profits of over $105 million during US Treasury POMO events.

JEL-codes: G12 G21 G24 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: High Frequency Trading in the Equity Markets During U.S. Treasury POMO (2013)
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: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-319-98714-9_4

Ordering information: This item can be ordered from
http://www.springer.com/9783319987149

DOI: 10.1007/978-3-319-98714-9_4

Access Statistics for this chapter

More chapters in Dynamic Modeling and Econometrics in Economics and Finance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().