Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 680: Interactions among High-Frequency Traders
Evangelos Benes, James Brugler, Erik Hjalmarsson () and Filip Zikes
Additional contact information
Evangelos Benes: Bank of England, Postal: Threadneedle Street, London, EC2R 8AH, U.K.
James Brugler: University of Melbourne, Department of Finance, Postal: Level 11, 198 Berkeley St, Victoria, 3010, Australia
Erik Hjalmarsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Filip Zikes: Division of Financial Stability, Federal Reserve Board, Postal: 1801 K Street NW, Washington, DC 20037
Abstract: Using unique transactions data for individual high-frequency trading (HFT)firms in the U.K. equity market, we examine the extent to which the trading activity of individual HFT firms is correlated with each other and the impact on price effciency. We find that HFT order flow, net positions, and total volume exhibit significantly higher commonality than those of a comparison group of investment banks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information-based and so does not generally contribute to undue price pressure and price dislocations.
Keywords: High-Frequency Trading; Correlated Trading Strategies; Price Discovery
48 pages, December 2016
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