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Order protection through delayed messaging


  • Aldrich, Eric M.
  • Friedman, Daniel


Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the standard continuous double auction market format. The model predicts that a messaging delay will generally improve price efficiency and lower transactions cost but will increase queuing costs. Some of the predictions are testable in the field or in a laboratory environment.

Suggested Citation

  • Aldrich, Eric M. & Friedman, Daniel, 2017. "Order protection through delayed messaging," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2017-502, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbmdn:spii2017502

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    References listed on IDEAS

    1. Albert J. Menkveld & Marius A. Zoican, 2017. "Need for Speed? Exchange Latency and Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 30(4), pages 1188-1228.
    2. Breckenfelder, Johannes, 2013. "Competition between high-frequency traders, and market quality," MPRA Paper 66715, University Library of Munich, Germany, revised Dec 2013.
    3. Brogaard, Jonathan & Garriott, Corey, 2019. "High-Frequency Trading Competition," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(4), pages 1469-1497, August.
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    Cited by:

    1. Angerer, Martin & Neugebauer, Tibor & Shachat, Jason, 2019. "Arbitrage bots in experimental asset markets," MPRA Paper 96224, University Library of Munich, Germany.

    More about this item


    market design; high-frequency trading; continuous double auction; IEX; lab experiments;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • 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

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