High frequency trading and end-of-day price dislocation
Douglas Cumming () and
No 2013/16, CFS Working Paper Series from Center for Financial Studies (CFS)
We show that the presence of high frequency trading (HFT) has significantly mitigated the frequency and severity of end-of-day price dislocation, counter to recent concerns expressed in the media. The effect of HFT is more pronounced on days when end of day price dislocation is more likely to be the result of market manipulation on days of option expiry dates and end of month. Moreover, the effect of HFT is more pronounced than the role of trading rules, surveillance, enforcement and legal conditions in curtailing the frequency and severity of end-ofday price dislocation. We show our findings are robust to different proxies of the start of HFT by trade size, cancellation of orders, and co-location.
Keywords: High frequency trading; End-of-day Price dislocation; Manipulation; Trading Rules; Surveillance; Law and Finance (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 K22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-law and nep-mst
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Journal Article: High frequency trading and end-of-day price dislocation (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:201316
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