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High-Frequency Trading around Macroeconomic News Announcements: Evidence from the U.S. Treasury Market

George Jiang, Ingrid Lo and Giorgio Valente ()

Staff Working Papers from Bank of Canada

Abstract: This paper investigates high-frequency (HF) market and limit orders in the U.S. Treasury market around major macroeconomic news announcements. BrokerTec introduced i-Cross at the end of 2007 and we use this exogenous event as an instrument to analyze the impact of HF activities on liquidity and price efficiency. Our results show that HF activities have a negative effect on liquidity around economic announcements: they widen spreads during the pre-announcement period and lower depth on the order book during the post-announcement period. The negative impact on liquidity mainly derives from HF trades. Nonetheless, HF trades improve price efficiency during both the preannouncement and post-announcement periods.

Keywords: Financial; markets (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2014
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:14-56

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