Low-Latency Trading and Price Discovery: Evidence from the Tokyo Stock Exchange in the Pre-Opening and Opening Periods

Mario Bellia, Loriana Pelizzon (), Marti G. Subrahmanyam, Jun Uno and Darya Yuferova
Additional contact information
Marti G. Subrahmanyam: Leonard N. Stern School of Business, New York University
Jun Uno: Waseda University; Ca' Foscari University of Venice
Darya Yuferova: Norwegian School of Economics (NHH)

No 2020:09, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We study whether the presence of low-latency traders (including high-frequency traders (HFTs)) in the pre-opening period contributes to market quality, defined by price discovery and liquidity provision, in the opening auction. We use a unique dataset from the Tokyo Stock Exchange (TSE) based on server-IDs and find that HFTs dynamically alter their presence in different stocks and on different days. In spite of the lack of immediate execution, about one quarter of HFTs participate in the pre-opening period, and contribute significantly to market quality in the pre-opening period, the opening auction that ensues and the continuous trading period. Their contribution is largely different from that of the other HFTs during the continuous period.

Keywords: High-Frequency Traders (HFTs); Pre-Opening; Opening Call Auction; Price Discovery; Liquidity provision (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Pages: 89 pages
Date: 2020
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Low-latency trading and price discovery: Evidence from the Tokyo Stock Exchange in the pre-opening and opening periods (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2020:09

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