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The information content of high-frequency traders aggressive orders: recent evidence

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  • Pamela Saliba

Abstract

This empirical study uses a unique recent data set provided by the French regulator ‘Autorité des Marchés Financiers’ and gives some evidence concerning the impact of aggressive orders on the price formation process and the information content of these orders according to the different order flow categories (high-frequency traders, agency participants and proprietary participants). We find that both the instantaneous and the transient price impact of aggressive orders consuming exactly the quantity present at the best limit is higher than that of the ones consuming less than the quantity present at the best limit. Furthermore, the price impact is an increasing function with respect to the consumed share in percentage. We show that these price impact disparities are sustainable over time: both price impacts are permanent. In contrast to previous literature, we find that aggressive orders of HFTs carry more information about the short-term behaviour of the price than the ones of agency and proprietary members. This new finding may be an indicator of the evolution of high frequency traders activity over the years.

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  • Pamela Saliba, 2020. "The information content of high-frequency traders aggressive orders: recent evidence," Quantitative Finance, Taylor & Francis Journals, vol. 20(11), pages 1779-1794, November.
    • Handle: RePEc:taf:quantf:v:20:y:2020:i:11:p:1779-1794
    DOI: 10.1080/14697688.2020.1748700
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    Cited by:

    1. Arumugam, Devika & Prasanna, P. Krishna & Marathe, Rahul R., 2023. "Do algorithmic traders exploit volatility?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    2. Ligot, Stephanie & Gillet, Roland & Veryzhenko, Iryna, 2021. "Intraday volatility smile: Effects of fragmentation and high frequency trading on price efficiency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).

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