High frequency trading and end-of-day price dislocation
AbstractWe 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. --
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Bibliographic InfoPaper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2013/16.
Date of creation: 2013
Date of revision:
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High frequency trading; End-of-day Price dislocation; Manipulation; Trading Rules; Surveillance; Law and Finance;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-FMK-2013-11-22 (Financial Markets)
- NEP-LAW-2013-11-22 (Law & Economics)
- NEP-MST-2013-11-22 (Market Microstructure)
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