Do "speed bumps" prevent accidents in financial markets?
- Is it true that speed bumps level the playing field, make financial markets more stable and reduce negative externalities of high-frequency trading (HFT) firms? We examine how the implementation of a particular speed bump – Midpoint Extended Life order (M-ELO) on Nasdaq impacted financial markets stability in terms of occurrences of mini-flash crashes in individual securities. We use high-frequency order book message data around the implementation date and apply difference-in-differences analysis to estimate the average treatment effect of the speed bump on market stability and liquidity provision. The results suggest that the introduction of the M-ELO decreases the average number of crashes on Nasdaq compared to other exchanges by 4.7%. Liquidity provision by HFT firms also improves. These findings imply that technology-based solutions by exchanges are feasible alternatives to regulatory intervention towards safer markets.
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| Verfasserangaben: | Jorge GonçalvesGND, Roman KräusslORCiDGND, Vladimir Levin |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-515971 |
| URL: | https://ssrn.com/abstract=3478856 |
| Titel des übergeordneten Werkes (Englisch): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 636 |
| Schriftenreihe (Bandnummer): | CFS working paper series (636) |
| Verlag: | Center for Financial Studies |
| Verlagsort: | Frankfurt, M. |
| Dokumentart: | Arbeitspapier |
| Sprache: | Englisch |
| Jahr der Fertigstellung: | 2019 |
| Jahr der Erstveröffentlichung: | 2019 |
| Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Datum der Freischaltung: | 04.11.2019 |
| Freies Schlagwort / Tag: | Mini-flash crash; midpoint extended life order; speed bump |
| Ausgabe / Heft: | This version - July 2019 |
| Seitenzahl: | 32 |
| HeBIS-PPN: | 456513337 |
| Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| JEL-Klassifikation: | C Mathematical and Quantitative Methods / C2 Single Equation Models; Single Variables / C21 Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions (Updated!) |
| Sammlungen: | Universitätspublikationen |
| Lizenz (Deutsch): |  Deutsches Urheberrecht |
