Interactions among High-Frequency Traders
Erik Hjalmarsson () and
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Evangelos Benes: Bank of England, Postal: Threadneedle Street, London, EC2R 8AH, U.K.
James Brugler: University of Melbourne, Department of Finance, Postal: Level 11, 198 Berkeley St, Victoria, 3010, Australia
Erik Hjalmarsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden, http://www.economics.gu.se
Filip Zikes: Division of Financial Stability, Federal Reserve Board, Postal: 1801 K Street NW, Washington, DC 20037
No 680, Working Papers in Economics from University of Gothenburg, Department of Economics
Using unique transactions data for individual high-frequency trading (HFT)firms in the U.K. equity market, we examine the extent to which the trading activity of individual HFT firms is correlated with each other and the impact on price effciency. We find that HFT order flow, net positions, and total volume exhibit significantly higher commonality than those of a comparison group of investment banks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information-based and so does not generally contribute to undue price pressure and price dislocations.
Keywords: High-Frequency Trading; Correlated Trading Strategies; Price Discovery (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
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