High-Frequency Trading Competition

Preprint
Publisher Website
Google Scholar
  • 1 January 2014
    • preprint
      • Published in RePEc
Abstract
We analyze trading dynamics as successive high-frequency trading (HFT) firms begin to trade stocks in an equity market. Entrants compete with incumbents for volume, and there is crowding out. Earlier entry is associated with larger effects. After Passive HFT entry, incumbent spreads tighten. After Aggressive HFT entry, incumbent order flow loses informedness. Revenue datasuggest entry reduces the profitability of HFT activity. The results show that part of the value of HFT comes from its competitiveness.
All Related Versions

This publication has 0 references indexed in Scilit: