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US cross-listing and domestic high-frequency trading: Evidence from Canadian stocks

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  • Dodd, Olga
  • Frijns, Bart
  • Indriawan, Ivan
  • Pascual, Roberto

Abstract

We find that US cross-listing of Canadian stocks enhances domestic high-frequency trading (HFT) activity in the form of both opportunistic trading and market-making. First, US cross-listing boosts HFT low-latency cross-border arbitrage. This highly correlated HFT arbitrage activity across markets enhances stock price efficiency by correcting mispricing. Second, US cross-listing leads to an increase in news trading activity by high-frequency traders around US public macro-news releases. Finally, cross-listing increases a stock’s reliance on high-frequency market makers to provide liquidity. Yet, we find no evidence of higher fragility in liquidity supply after cross-listing.

Suggested Citation

  • Dodd, Olga & Frijns, Bart & Indriawan, Ivan & Pascual, Roberto, 2023. "US cross-listing and domestic high-frequency trading: Evidence from Canadian stocks," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 301-320.
    • Handle: RePEc:eee:empfin:v:72:y:2023:i:c:p:301-320
    DOI: 10.1016/j.jempfin.2023.03.012
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    More about this item

    Keywords

    US cross-listing; High-frequency trading; Cross-market arbitrage; US news announcements; Liquidity; Equity markets;
    All these keywords.

    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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