High frequency trading and end-of-day price dislocation

Preprint
Publisher Website
Google Scholar
  • 1 January 2013
    • preprint
      • Published in RePEc
Abstract
We show that the presence of high frequency trading (HFT) has significantly mitigated the frequency and severity of end-of-day price dislocation, counter to recent concerns expressed in the media. The effect of HFT is more pronounced on days when end of day price dislocation is more likely to be the result of market manipulation on days of option expiry dates and end of month. Moreover, the effect of HFT is more pronounced than the role of trading rules, surveillance, enforcement and legal conditions in curtailing the frequency and severity of end-ofday price dislocation. We show our findings are robust to different proxies of the start of HFT by trade size, cancellation of orders, and co-location.
All Related Versions

This publication has 0 references indexed in Scilit: