The ambivalent role of high-frequency trading in turbulent market periods
- We show an ambivalent role of high-frequency traders (HFTs) in the Eurex Bund Futures market around high-impact macroeconomic announcements and extreme events. Around macroeconomic announcements, HFTs serve as market makers, post competitive spreads, and earn most of their profits through liquidity supply. Right before the announcement, however, HFTs significantly widen spreads and cause a rapid but short-lived drying-out of liquidity. In turbulent periods, such as after the U.K. Brexit announcement, HFTs shift their focus from market making activities to aggressive (but not necessarily profitable) directional strategies. Then, HFT activity becomes dominant and market quality can degrade.
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| Author: | Nikolaus HautschORCiDGND, Michael Noé, Shuo Sarah Zhang |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-438666 |
| URL: | https://ssrn.com/abstract=3020142 |
| Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 580 |
| Series (Serial Number): | CFS working paper series (580) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2017 |
| Year of first Publication: | 2017 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2017/10/17 |
| Tag: | Brexit; Futures Market; High Frequency Trading; Market Making; News Releases |
| Issue: | August 16, 2017 |
| Page Number: | 61 |
| HeBIS-PPN: | 419153225 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
