Cross-Venue Liquidity Provision: High Frequency Trading and Ghost Liquidity

Hans Degryse, Rudy De Winne, Carole Gresse and Richard Payne
Additional contact information
Carole Gresse: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Richard Payne: Cass Business School - City University London - City University London

Post-Print from HAL

Abstract: We measure the extent to which consolidated liquidity in modern fragmented equity markets overstates true liquidity due to a phenomenon that we call Ghost Liquidity (GL) . GL exists when traders place duplicate limit orders on competing venues, intending for only one of the orders to execute, and when one does execute, duplicates are cancelled. We employ data from 2013, covering 91 stocks trading on their primary exchanges and three alternative platforms and where order submitters are identified consistently across venues, to measure the incidence of GL and to investigate its determinants. On average, for every 100 shares passively traded by a multi-market liquidity supplier on a given venue, slightly more than 19 shares are immediately cancelled by the same liquidity supplier on a different venue. This percentage is significantly greater for HFTs than for non-HFTs and for those trading as principal. GL is larger on alternative platforms than on primary exchanges. Overall, GL implies that simply measured consolidated liquidity exceeds true consolidated liquidity but its average weight in total consolidated depth, i.e., slightly more than 4%, does not challenge the liquidity benefits of fragmentation.

Keywords: High Frequency Trading; Algorithmic Trading; Fragmentation; Ghost liquidity (search for similar items in EconPapers)
Date: 2018-10
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published in FMA Annual Meeting, Oct 2018, San Diego, United States

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

Related works:
Working Paper: Cross-Venue Liquidity Provision: High Frequency Trading and Ghost Liquidity (2021)
Working Paper: Cross-Venue Liquidity Provision: High Frequency Trading and Ghost Liquidity (2019)
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:hal:journl:hal-01947824

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().