High-frequency trading and institutional trading costs

Arbeitspapier

Using bond futures data, we test whether high-frequency trading (HFT) is engaging in back running, a trading strategy that can create costs for financial institutions. We reject the hypothesis of back running and find instead that HFT mildly improves trading costs for institutions. After a rapid increase in the number of HFTs, trading costs as measured by implementation shortfall decrease by 27 basis points for smaller-sized positions ($ 2 - $ 10 million notional). For larger-sized positions there is no significant effect. We explain the improvement as being the consequence of HFT reducing effective spreads and per-trade price impacts.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Canada Staff Working Paper ; No. 2018-8

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Institutions and Services: General ; Information and Market Efficiency; Event Studies; Insider Trading ; Market Structure, Firm Strategy, and Market Performance: General
• Thema: Financial markets ; Market structure and pricing ; Financial system regulation and policies

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Chen, Marie ; Garriott, Corey
• Ereignis: Veröffentlichung
• (wer): Bank of Canada
• (wo): Ottawa
• (wann): 2018

Weitere Informationen

• DOI: doi:10.34989/swp-2018-8
• Handle: http://hdl.handle.net/10419/197861
• Letzte Aktualisierung: 20.09.2024, 08:20 MESZ