IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v49y2014i2p371-394.html
   My bibliography  Save this article

The Provision of Liquidity by High-Frequency Participants

Author

Listed:
  • Michael Goldstein
  • Elvis Jarnecic
  • Mark Snape

Abstract

This paper examines the order submission strategies and supply of liquidity by high-frequency participants versus the remainder of participants in the limit order book. The results show that high-frequency participants submit orders at multiple prices in the limit order book, concentrated at or within the quote. This activity translates into the provision of liquidity on an on-going basis, which is robust to fast versus slow and volatile markets, together suggesting that high-frequency participants resolve temporal liquidity imbalances in the limit order book. The evidence is consistent with high-frequency trading (HFT) improving market liquidity, but there remain issues surrounding high-frequency participants’ effect on market depth and the difficulty of trading of non-HFT participants.

Suggested Citation

  • Michael Goldstein & Elvis Jarnecic & Mark Snape, 2014. "The Provision of Liquidity by High-Frequency Participants," The Financial Review, Eastern Finance Association, vol. 49(2), pages 371-394, May.
  • Handle: RePEc:bla:finrev:v:49:y:2014:i:2:p:371-394
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/fire.12040
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:pacfin:v:45:y:2017:i:c:p:91-102 is not listed on IDEAS
    2. repec:eee:finlet:v:26:y:2018:i:c:p:198-203 is not listed on IDEAS
    3. Upson, James & Van Ness, Robert A., 2017. "Multiple markets, algorithmic trading, and market liquidity," Journal of Financial Markets, Elsevier, vol. 32(C), pages 49-68.
    4. Tian, Xiao & Do, Binh & Duong, Huu Nhan & Kalev, Petko S., 2015. "Liquidity provision and informed trading by individual investors," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 143-162.
    5. OUATTARA, Aboudou, 2016. "Impact of the transition to continous trading on emerging financial market's liquidity : Case study of the West Africa Regional Exchange Market (BRVM)," MPRA Paper 75391, University Library of Munich, Germany.
    6. Serbera, Jean-Philippe & Paumard, Pascal, 2016. "The fall of high-frequency trading: A survey of competition and profits," Research in International Business and Finance, Elsevier, vol. 36(C), pages 271-287.
    7. repec:eee:pacfin:v:53:y:2019:i:c:p:186-207 is not listed on IDEAS
    8. Manahov, Viktor, 2016. "A note on the relationship between high-frequency trading and latency arbitrage," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 281-296.
    9. repec:eee:pacfin:v:51:y:2018:i:c:p:366-375 is not listed on IDEAS
    10. repec:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-016-2286-1 is not listed on IDEAS
    11. Mestel, Roland & Murg, Michael & Theissen, Erik, 2018. "Algorithmic trading and liquidity: Long term evidence from Austria," Finance Research Letters, Elsevier, vol. 26(C), pages 198-203.
    12. repec:eee:pacfin:v:45:y:2017:i:c:p:82-90 is not listed on IDEAS
    13. repec:mup:actaun:actaun_2016064061911 is not listed on IDEAS
    14. Nidhi Aggarwal & Venkatesh Panchapagesan & Susan Thomas, 2019. "When do regulatory interventions work?," Working Papers id:13040, eSocialSciences.
    15. Breckenfelder, Johannes, 2019. "Competition among high-frequency traders, and market quality," Working Paper Series 2290, European Central Bank.
    16. Wang, Qin & Zhang, Jun, 2015. "Does individual investor trading impact firm valuation?," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 120-135.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:49:y:2014:i:2:p:371-394. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: http://edirc.repec.org/data/efaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.