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The rise of fast trading: Curse or blessing for liquidity?

Author

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  • Desagre, Christophe

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

  • D’Hondt, Catherine

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

  • Petitjean, Mikael

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

Abstract

We study how market liquidity on Euronext has evolved with the rise of fast trading. We identify fast traders by directly measuring message traffic and the lifetime of orders for every individual market member on Euronext using their identification codes. We observe an overall improvement in terms of liquidity between 2002 and 2006. However, the most exposed stocks to fast trading exhibit the weakest increase in liquidity and lose the liquidity advantage they had before the rise of fast trading.

Suggested Citation

  • Desagre, Christophe & D’Hondt, Catherine & Petitjean, Mikael, 2021. "The rise of fast trading: Curse or blessing for liquidity?," LIDAM Reprints LFIN 2021018, Université catholique de Louvain, Louvain Finance (LFIN).
    • Handle: RePEc:ajf:louvlr:2021018
    DOI: https://doi.org/10.3917/fina.pr.i
    Note: In: Finance : revue de l'Association française de finance, 202, vol. 43, p. 119-158
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    Cited by:

    1. Karkowska, Renata & Palczewski, Andrzej, 2023. "Does high-frequency trading actually improve market liquidity? A comparative study for selected models and measures," Research in International Business and Finance, Elsevier, vol. 64(C).

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