High-Frequency Trading and Institutional Trading Costs
Marie Chen and
Corey Garriott ()
Staff Working Papers from Bank of Canada
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: Financial markets; Financial system regulation and policies; Market structure and pricing (search for similar items in EconPapers)
JEL-codes: G14 G20 L10 (search for similar items in EconPapers)
Pages: 49 pages
New Economics Papers: this item is included in nep-mst
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Journal Article: High-frequency trading and institutional trading costs (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:18-8
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