Competition between high-frequency traders, and market quality

Johannes Breckenfelder

MPRA Paper from University Library of Munich, Germany

Abstract: This is the first empirical evidence on the competition between high-frequency traders (HFTs) and its influence on market quality. We exploit the first entries of international HFTs into the Swedish equity market in 2009 and conduct a difference-in-differences analysis using trade-by-trade data. To further identify the effect, we use the Federation of European Securities Exchanges (FESE) tick size harmonization as an exogenous event that caused HFTs to start trading in stocks. When HFTs compete for trades their liquidity consumption increases. As a result, liquidity deteriorates significantly and short-term volatility rises.

Keywords: competition; high-frequency trading; tick size harmonization; FESE; changes in competition (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G21 G23 (search for similar items in EconPapers)
Date: 2013-03, Revised 2013-12
New Economics Papers: this item is included in nep-cfn, nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/66715/3/MPRA_paper_66715.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/93481/1/MPRA_paper_93481.pdf revised version (application/pdf)

Related works:
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:pra:mprapa:66715

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().