High-Frequency Trading and Market Performance

• 成果类型: Article
• 署名作者: Baldauf, Markus; Mollner, Joshua
• 署名单位: University of British Columbia; Northwestern University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12882
• 发表日期: 2020
• 页码: 1495-1526
• 关键词: limit order book; INFORMATION; COMPETITION; price; liquidity; FRAGMENTATION; auctions; IMPACT; size; fees

摘要

We study the consequences of, and potential policy responses to, high-frequency trading (HFT) via the tradeoff between liquidity and information production. Faster speeds facilitate HFT, with consequences for this tradeoff: Information production decreases because informed traders have less time to trade before HFTs react, but liquidity (measured by the bid-ask spread) improves because informational asymmetries decline. HFT also pushes outcomes inside the frontier of this tradeoff. However, outcomes can be restored to the frontier by replacing the limit order book with one of two alternative mechanisms: delaying all orders except cancellations or implementing frequent batch auctions.